Inflation is coming down, but ‘not as quickly as headlines suggest,’ says UNC economist

CHAPEL HILL — Inflation fell to its lowest annual rate in more than two years during June, according to data announced Wednesday by the Labor Department.

But in an exclusive interview with WRAL TechWire, Gerald Cohen, chief economist at the Kenan Institute of Private Enterprise, shared his take on the recent numbers.

“Inflation is coming down, but not as quickly as the headline numbers suggest,” Cohen shared via email. “Core inflation, which illustrates the underlying dynamics of inflation, is still up 4.8% over the last year vs. headline numbers, which can be pushed around by volatile food and energy prices and have risen 3% in the year ending June.”

In new numbers released Thursday, inflation also is cooling at the wholesale level.

Another sign inflation is cooling: Wholesale prices continue to decelerate

According to Cohen, these numbers could affect whether the Federal Reserve raises its benchmark interest rate later this month.

The Fed next meets July 25-26, and Cohen says that they will “very likely” go through with a quarter-point rate hike.

“This may be their last hike for a while, but that depends on the economic data,” said Cohen. “In particular, will job growth and underlying inflation continue to slow?”

The Employment Situation for July is scheduled to be released on Friday, August 4.

June inflation numbers come in lower than expected, continue cooling trend

NCSU economist’s take

N.C. State economist Dr. Mike Walden had a positive take on Wednesday’s numbers.

“[Wednesday’s] inflation report was very positive. All the measures – year over year total, year over year core rate, and monthly rate showed improvement – meaning slower price increases,” Walden told WRAL TechWire.

“This increases the odds the Fed will continue its pause in increasing interest rates. It also moves us much closer to the Fed’s goal of a year over year total inflation rate of 2 percent. However, households should not expect average prices to drop. But they can expect the Fed to potentially lower interest rates sometime in early 2024. The chances of a ‘soft landing’ – meaning achieving lower inflation without a recession – has also risen.”