Stimulus Update: Inflation Eases Slightly as Americans Await State Stimulus Checks

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  • Americans have been grappling with sky-high living costs for months.
  • Inflation levels fell slightly in July, which, combined with state stimulus aid, should help.

Finally, Americans are getting some relief.

Inflation has been soaring since the start of the year, and it's forced a lot of people to rethink their spending. Some Americans have had to cut back dramatically to ensure that they were able to cover basic necessities like gas and food. Others, meanwhile, had to raid their savings and rack up credit card debt just to manage their costs.

Although inflation has clearly been a major issue for months on end, it hasn't prompted lawmakers to issue another round of stimulus checks. In fact, the only aid Americans can look forward to this summer is state-specific stimulus checks, which many states aren't issuing.

But thankfully, inflation cooled modestly in July after peaking in June. So between that and state stimulus checks, some Americans could finally be in for a nice dose of relief.

Lower inflation levels than expected

In June, the Consumer Price Index (CPI), which measures fluctuations in the cost of goods and services, rose a whopping 9.1% on an annual basis. Economists were expecting a slightly lower reading of 8.7% in July and were surprised (in a good way) when the CPI rose only 8.5%.

To be clear, an 8.5% annual increase in the cost of consumer goods is still huge. But compared to June's number, it may not seem so bad.

A big reason the CPI didn't rise as much in July is that gas prices finally eased. That's no doubt been a huge help to cash-strapped Americans.

Meanwhile, a number of states are issuing stimulus checks this summer after having excess funds in their budgets to share. If living costs continue to dip, those who receive a state stimulus could end up in a much stronger financial position this fall.

Will interest rates continue to rise in the wake of July's inflation data?

The Federal Reserve has been steadily hiking up interest rates in an effort to slow the rate of inflation and help consumers get relief. But in doing so, it's made many types of borrowing more expensive. And that's not a good thing for consumers who have been forced to rely on their credit cards to fill up their cars and put food on the table.

It will be interesting to see what move the Fed makes following July's CPI report. On the one hand, an annual 8.5% increase in living costs is still significant. But compared to June, it's a notable drop. And so the Fed may decide to move forward with only a modest rate hike at its next meeting -- or maybe even no rate hike at all. That would, in turn, be great news for consumers who are now stuck with debt in the wake of inflation and the absence of stimulus aid.

Of course, we don't know whether inflation levels will continue to drop at a nice clip as 2022 rolls along. While July's numbers are encouraging, we may need to wait until August and September CPI data comes in before we can begin to declare a modest victory over inflation. But for now, a lower CPI reading than anticipated is something Americans should be happy about.

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