Inflation remained persistently sticky during July 2024. Reported Data on Headline Inflation for the month read at 2.84 percent change on over-the-year basis. Change over-the-month totaled 0.15 percent. The current over-the-year change is significantly greater (95% level) than the average increases for past months of July since 2011 (excluding Covid-19 years 2021 and 2022), which is 1.7 percent with an upper bound of 2.36 percent. Otherwise, the current over-the-month change is not significantly different than the average change since June 2023. Increase in the Shelter Index continues to drive up the inflation as it registered 4.7 percent. These data along with the overall Unemployment metrics make it difficult to see Interest Rates drops at the next Federal Open Market Committee.

The expectation for July’s data was to see a significant change in the Shelter Index as the effect of monetary tightening is presumably lagging. Given the observed July’s data on Unemployment (cooling), it sounds tempting to state that it is too soon to see declines in Shelter just yet. However, the softening of the labor market did not start in July. The over-the-year change in the Shelter Index is still as double compared to its pre-pandemic levels. To keep some perspective, July 2023’s Shelter Index increased by 7 percent while it registered a 2.2 in July 2020. Although the index figure reads lower that such 7 percent, its over the month decrease is not significant. The current reading does not provide evidence that the Inflation is approaching the 2% target set by the Federal Reserve.

Data Source: US Bureau of Labor Statistics. Econometricus own Calculations.

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