Economists Split on July CPI as Sahm Sees Disinflation, Schiff Calls Data Misleading
Macro
July's consumer price index report drew conflicting interpretations from economists on Wednesday, with former Fed economist Claudia Sahm calling the data good news for the Federal Reserve while veteran economist Peter Schiff labeled the 0.1% monthly rise misleading. The CPI rose 3.4% year-over-year in July, in line with estimates and down from June's 3.5% increase, while core CPI eased to 2.5% annually from 2.6%. Sahm noted that supercore inflation, or non-housing core services, rose just 0.2% in July and that the share of the CPI basket with prices rising 5% or more fell back to average levels seen in 1997-2005, when inflation was close to 2%. Schiff argued that the way energy prices are captured created a lag effect, since oil and gasoline started July depressed before rebounding sharply, meaning the print still reflects May's oil price collapse rather than July's rally. Market strategist David Rosenberg echoed the disinflation view, saying core CPI is running at a 1.6% annual rate over the three months to July, while James Thorne of Wellington Altus said the Fed's benchmark rate remains above the neutral level needed to keep the economy balanced.
