U.S. inflation surges in July
Consumer prices in the United States jumped more than expected in July, pushing the overall inflation rate to a 17-year high.
The U.S. Labour Department said Thursday that prices grew by 0.8 per cent in the month, double the 0.4 per cent growth economists had been projecting.
Higher prices for gas, food and clothing were behind the rise.
The July increase followed jumps of 0.6 per cent in May and 1.1 per cent in June.
From July 2007 to July 2008, prices were up 5.6 per cent — the biggest 12-month rise since January 1991.
Core inflation, which factors out the more volatile components such as food and energy costs, came in at 0.3 per cent in July. Economists had been forecasting core inflation of 0.2 per cent. The 12-month core inflation rate was 2.5 per cent.
The most recent inflation report doesn't reflect a retreat in U.S. gasoline prices in late July and early August.
"Some relief may be in the offing, given indications that gasoline prices moved lower in August," said Royal Bank assistant chief economist Paul Ferley.
"However, the annual rate of inflation is likely to remain above 5.5 per cent through the third quarter, which will likely keep the [Federal Reserve] wary. Thus, we expect that the central bank, confronted with the dual and offsetting risks of stronger inflation and weaker growth, will keep the Fed funds unchanged at two per cent through the middle of next year," Ferley said.
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