US inflation weaker than expected in July

Inflation in the United States was lower in July than a month earlier, mainly due to lower fuel prices. According to the US government, inflation stood at 8.5% year-on-year last month, down from 9.1% in June, the highest level in more than 40 years. The figure is of great importance to the US central bank, which is raising interest rates to combat high inflation.

The figure is also lower than expected. Economists generally expected an 8.7% rise in consumer prices in the world’s largest economy. Compared to June, consumer prices were unchanged, after rising 1.3% a month earlier.

Interest raised

The Federal Reserve has raised interest rates several times this year to deal with high inflation. Over the past two interest rate decisions, interest rates have been raised in solid steps of 0.75 percentage points. With inflation appearing to be easing, the Fed may be able to raise interest rates a bit less, likely 0.5 percentage points, in its next rate decision in September.

Read also | How likely is a recession in the United States?

Financial markets are concerned that these interest rate hikes will hurt the US economy. However, these concerns were tempered last week by a strong US jobs data. US job growth was much stronger than expected in July, which also helped the Fed to pursue its interest rate policy.

The lower-than-expected inflation figure pleased investors, as New York stock markets appear to be starting off with strong gains. The AEX index in Amsterdam also rose after the figure was released.