US inflation lower than expected in July

Inflation in the US was lower in July than in the previous month, mainly due to lower fuel prices. According to the US government, inflation reached 8.5 percent on an annual basis last month, from 9.1 percent in June, the highest level in more than 40 years. This number is of great importance for the US central bank, which is raising interest rates to combat high inflation.

The number is also lower than expected. Economists generally expected an 8.7 percent increase in consumer prices in the world’s largest economy. Compared to June, consumer prices remained unchanged after rising 1.3 percent in the previous month.

The Federal Reserve has raised interest rates several times this year to tackle high inflation. In the two previous interest rate decisions, interest rates were raised in steady steps of 0.75 percentage points. With inflation apparently subsiding, the Fed may be able to raise rates somewhat less aggressively, perhaps by 0.5 percentage point, in its next rate decision in September.

There are concerns in the financial markets that these interest rate hikes could harm the US economy. However, these concerns were eased last week by strong US job numbers. US job growth was much stronger than expected in July, giving the Fed more support to pursue interest rate policy.

The lower-than-expected inflation rate has pleased investors, as it appears that the stock markets in New York are beginning to post significant gains. The Amsterdam AEX also rose after the figure was published.