Thank the tomato
Thank the tomato this time. It sank 40% in June; grapes dropped by 49%,and thus the CPI rose by a paltry 0.1%. It had been expected to rise by 0.5%.
Remember the tomato index two months ago? Thank the tomato this time. It sank 40% in June; grapes dropped by 49%,and thus the CPI rose by a paltry 0.1%. It had been expected to rise by 0.5%. It's good news for Stanley Fischer, who been torn between his wish to foster growth, which requires keeping interest low, and the need to keep prices stable. Soaring commodity prices have lifted prices sharply everywhere, here too. The result has been a series of high CPIs. At this stage, however, it looks like the imported inflation has slowed somewhat, thanks to a leveling off of commodity prices worldwide - except for oil, which is continuing to foment increases in the cost of transportation.
Two items in particular contributed to inflation in June: clothing and footwear, which jumped 11.3% and 13.5%, respectively, adding about 0.37% to the index. But traditionally, end-of-season clothing sales start in July, so clothing prices can be expected to drop next month.
The current CPI is especially good news for the numerous companies that have taken out CPI-linked loans, and have had to deal with particularly high financing costs because of the high indexes of the past few months. Some of these companies will soon be refinancing their debt, and the concern had been that they would not be able to do so. Another high CPI would have claimed a few more victims among companies unable to service their debt.
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