Kendall Payton, editorial associate
The consumer price index (CPI) rose 8.5% in July, compared to a 9.1% year-over-year increase in June. The drop in gas prices is a notable indicator of slowing inflation, but rates continue to increase among food and energy prices. The food index has increased 10.9% in the past year, the fastest pace since May 1979, according to CNBC.
"There's a good reason to think inflation will continue to slow. What I think gets lost in that discussion is, slow by how much?" Michael Pugliese, an economist at Wells Fargo, told the Associated Press. Other factors that continue to bolster inflation include clogged supply chains, and massive debt from pandemic-related monetary and fiscal stimulus.
Without volatile food and energy costs, core inflation rose 5.9% in July, the same year-over-year increase as in June. The federal reserve has raised interest rates more aggressively than usual in order to slow demand and curb inflation.
But the full effect of those rate hikes has yet to be felt. Brian Belski, chief investment strategist with BMO Capital Markets told CNN that inflation ebbs and flows. Right now, he says investors should not expect prices to decline as quickly as they have risen. "Inflation went up like an elevator but it will go down like an escalator."