By Alice Seeley

The U.S. Department of Labor reported that last month inflation slowed down more than predicted, resulting in lower gas prices and potentially leading the Federal Reserve to slow its planned interest rate hikes.

The department also reported that the consumer price index did not change in July, but overall the consumer price index (CPI) is 8.5% higher than it was a year ago today. Data from the department showed that the core CPI, which measures the changes in the price of goods and services, excluding food and energy, rose by 0.3% from June to July and 5.9% from a year ago. This is below what economists predicted. Bloomberg Economists predict that the core CPI could approach 7% in the coming months.

While there is hope that this news will stop the Federal Reserve from raising its interest rates as it did in June and July, some experts are not optimistic.

“I don’t think any decisions can be made based on just this one CPI print cooling off,” Gargi Chaudhuri, the head of investment strategy for the Americas at BlackRock’s iShares, stated. 

The president of the Federal Reserve Bank of Cleveland, Loretta Mester, agreed that a decision would not be made based on only one month’s data.

“It can’t just be one month. Oil prices went down in July; that’ll feed through to the July inflation report, but there’s a lot of risk that oil prices will go up in the fall,” Mester said.

“This is a necessary print for the Fed, but it’s not sufficient,” Michael Pond, head of inflation market strategy at Barclays, noted. “We need to see a lot more.”

The Labor Department report also revealed that two major categories dramatically decreased last month. In July, gas prices fell by 7.7%  after rising by 11.2% in June. This is the most considerable decrease since April 2020. However, gas prices are still 44% higher than a year earlier. The national average price of gas was $4.01 per gallon, the AAA reported on August 10. This is a dollar less than it was a month ago. Energy costs also dropped in July by 4.6% but are still 32.9% more than in 2021. Another category that fell was airfares, which dropped by 7.8% from the previous month.