10 Aug 2018
Highest Core Inflation in Decade Flattens Real U.S. Wage Growth
A gauge of U.S. consumer prices jumped by the most in a decade in July, eating into wage gains that have barely budged in the past four months and strengthening the case for the Federal Reserve to keep raising interest rates gradually.
The core measure of the Consumer Price Index, which excludes food and fuel, rose 2.4 percent from a year earlier, the biggest advance since September 2008, a Labor Department report showed Friday. From the prior month, both the main CPI index and core rate rose 0.2 percent -- matching expectations.
While shelter costs gave a big boost to the results, steady consumer demand is underpinning inflation just as a trade war threatens to lift costs on a range of goods. Sustained progress toward the Fed’s goal keeps the central bank on track for one or two more rate hikes this year even as price pressures are a blow to already weak increases in paychecks.
A separate Labor Department report on Friday showed inflation-adjusted wages were unchanged in July from the previous month and dropped 0.2 percent from a year earlier. The lack of much real wage growth has become a contentious issue for Republicans and Democrats heading into midterm congressional elections in November. (Source: Bloomberg)