Rising CPI

US inflation rose for the second consecutive month in August, driven by higher gas prices. However, core inflation, which excludes food and energy prices, continued to slow, signaling that the Federal Reserve’s rate hikes are having an impact. The Consumer Price Index (CPI) increased by 3.7% in August compared to the previous year, up from July’s 3.2% rise. This slightly exceeded economists’ expectations of a 3.6% annual rate. On a month-to-month basis, prices rose by 0.6% in August, compared to a 0.2% gain in July.

Core inflation, which is closely monitored by the Federal Reserve, slowed to 4.3% for the 12 months ending in August, its slowest pace since September 2021. Monthly core inflation increased by 0.3% in August, marking a significant pickup since February.

Consumer Price — US inflation accelerated in August for the second-straight month, pushed up by rising gas prices. Source/ Internet

The surge in gas prices played a significant role in the CPI’s acceleration in August, accounting for over half of the increase. The gasoline index within the CPI jumped by 10.6% in August, compared to a 0.2% gain in July. The overall energy index, which includes gasoline, rose by 5.6% in August.

Rising shelter costs also contributed to inflation. President Joe Biden acknowledged the spike in gasoline prices and emphasized the administration’s focus on reducing energy costs through investments in clean energy.

Global oil prices have recently risen due to OPEC+ production cuts and increased demand. The deadly flooding in Libya disrupted oil exports, which is expected to further raise gasoline prices.

Economists believe that volatile energy prices are unlikely to prevent the slowdown of inflation in the coming months. Factors such as weaker consumer spending and a cooler job market are expected to facilitate this slowdown.

The Federal Reserve is still expected to keep interest rates steady in its upcoming meeting, but the possibility of an additional rate hike beyond September remains on the table. While today’s inflation report may not significantly change the central bank’s plans, the pickup in inflation could increase the chances of additional tightening later in the year.

Financial markets currently see a 97% chance of the Fed maintaining the status quo, with lower odds of another pause in November, according to the CME FedWatch Tool.