Inflation at 17-Year High

Ugh.

Inflation reached a 17-year high last month, fueled by high gasoline and food prices, all but assuring that the Federal Reserve will keep interest rates at their current level for the time being.
Consumer prices were 5.6 percent higher last month than they were in July 2007, a brisker pace than economists had expected, the Labor Department said on Thursday.
That was the sharpest annual increase since January 1991, as Americans paid more for clothing, food, transportation and recreational products.
The news was distressing for investors and the stock markets initially fell on the report. The major exchanges recovered, however, and the Dow Jones industrials up more than 80 points in early afternoon trading. Investors returned to buying financial stocks, taking advantage of a sector that has fared poorly in recent sessions. The broader S.&P. 500-stock index was up 0.46 percent. Wal-Mart also reported a better-than-expected rise in quarterly profits, but the discount retail giant also issued a gloomy sales forecast for the rest of the year. In addition, crude oil prices continued to fall, dropping below $113 a barrel.
The overall Consumer Price Index, considered the benchmark gauge of domestic inflation, rose 0.8 percent in July. Economists had forecast a rise of half that rate. In June, prices rose 1.1 percent, the second highest monthly pace in 26 years.

Posted by Eddy Elfenbein on August 14th, 2008 at 4:09 pm

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