Thursday’s price data will be among the key barometers the central bank will weigh in deciding whether to continue raising interest rates. In its drive to tame inflation, the Fed has raised its benchmark rate 11 times since March 2022 to a 22-year high.
Used vehicle prices fell for a second straight month, dipping 1.3% from June and 5.6% from a year ago. Those prices had surged last year as a shortage of computer chips disrupted production of new vehicles, forcing buyers into the used market. The chip shortage has eased, and new-car production has rebounded, reducing demand for used cars and trucks.
Much of the inflationary surge that began in 2021 was caused by clogged supply chains: Ports, factories and freight yards were overwhelmed by the explosive economic rebound from the pandemic recession of 2020. The result was delays, parts shortages and higher prices. But supply-chain backlogs have eased in the past year, sharply reducing upward pressure on goods prices. Prices of long-lasting manufactured goods actually dipped in June.
Still, economists caution against reading too much into one month of numbers. Many of them expect inflation to continue trending lower. The moderating pace of inflation, combined with a resilient job market, has raised hopes that the Fed may achieve a difficult “soft landing”: — raising rates enough to tame inflation without causing a painful recession.