US inflation fell more than expected in July

Inflation in the US in July was lower than a month ago, mainly due to lower fuel prices. Inflation was 8.5 percent last month, up from 9.1 percent in June, the highest level in more than 40 years, according to the U.S. government. The figure is particularly significant for the US Federal Reserve, which is in the process of raising interest rates to combat high inflation.

The number is also lower than expected. Economists had generally expected an 8.7 percent increase in consumer prices in the world’s largest economy. Compared with June, consumer prices were unchanged after rising 1.3 percent a month earlier.

Interest increased

The Federal Reserve has raised interest rates several times this year to combat high inflation. In the last two interest rate decisions, interest rates were raised by strong steps of 0.75 percentage points. As inflation appears to be cooling, the central bank could raise interest rates slightly less strongly at its next rate cut in September, probably by 0.5 percentage points.

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Financial markets fear that these interest rate hikes will hurt the US economy. Those concerns were eased last week by a strong U.S. jobs figure. US job growth was stronger than expected in July, providing more support for the central bank to keep interest rate policy unchanged.

A lower-than-expected inflation number cheered investors as New York stock markets looked set to open with substantial gains. The AEX index in Amsterdam also rose after the figure was released.