A new government report shows that the pace of consumer price inflation fell in August to its lowest monthly level since February, although the 12-month rate of inflation remained historically high.
The consumer price index (CPI) rose 0.3 percent in July to August, the Labor Department said in a September 14 report, with the consensus forecast predicting a slightly higher rate of monthly inflation of 0.4 percent. This is a slower pace of consumer price growth than the rate of 0.5 percent in July and 0.9 percent in June, the latter marking the highest monthly spike in the measure since 2008.
While the month-on-month headline CPI numbers suggest that inflationary pressures are easing and reinforce the “transient” inflation narrative, experts say it is too early to jump to conclusions.
“The debate over whether inflation will be short-term or more sustained is not resolved,” Bankrate’s chief financial analyst Greg McBride told The Epoch Times in an emailed statement. “The jury will be out for many more months, especially with persistent supply chain constraints.”
The Federal Reserve noted in its most recent Beige Book report that many US businesses were experiencing inflation driven by supply constraints in input costs, with many firms indicating they expected to pass those higher prices on to consumers. Huh. Meanwhile, future inflation expectations among US consumers rose to an eight-year high in August, according to a New York Federal Reserve survey.
Tuesday’s CPI report also showed that consumer price inflation declined to 5.3 per cent in August, 0.1 per cent lower than figures for both June and July, representing the highest 12-month spike in 13 years.
So-called core inflation, which excludes the volatile categories of food and energy, rose 0.1 per cent in July to August, the lowest level since February 2021 and 0.3 per cent rate economists predicted. Core inflation rose to 0.9 percent monthly in April and then by the same percentage in June, the highest level since the early 1980s.
“The lower-than-expected growth in the headline, and especially the core, inflation for the month of August was underscored by easing of price pressures in some areas where we saw the biggest growth a few months ago. Airfare, accommodation, used car and truck prices and even motor vehicle insurance all declined in August, McBride said, supporting the idea of inflation being ‘temporary’.
Used car and truck prices, which rose 10.5 percent from May to June and were a clear example of the recent pulse of inflation, fell 1.5 percent in August. Transport service prices fell 2.3 percent, while airline fares declined 9.1 percent during the month.
Experts are looking to downplay costs as a possible hideout of future inflationary pressures.
“Rent and owners par rent – a proxy for homeownership costs – were both up 0.3 percent in August, but the worst is yet to come as rising home prices and higher rents have yet to fully reflect consumer value. index,” McBride noted.
The closely watched CPI report is likely to ease pressure on Federal Reserve officials to roll back some crisis support measures for the economy. Last year, the Fed cut its benchmark overnight interest rate to near zero and began buying $120 billion in Treasury and mortgage-backed securities each month to spur an economic recovery. Although rate hikes have yet to be revealed, Fed officials are considering when to begin asset purchases, with anticipation building ahead of the September 21-22 meeting of the Federal Open Market Committee. Possible announcement on the tapering timeline, the Fed’s monetary policy decision-making body.
“The easing of some so-called ‘temporary’ items in the inflation index would bolster the Federal Reserve’s argument that inflation will eventually move closer to their 2 percent target,” McBride said.
“Based on inflation data, don’t expect an immediate urgency to reduce asset purchases, even if the ongoing $120 billion in monthly Fed stimulus is increasingly risking inflation of a significant asset bubble,” he said. ” They said.
Fed officials have made a job market recovery a condition of tighter monetary policy. While economic output has fully recovered to its pre-pandemic levels, labor market recovery is lagging behind, with the US economy remaining under nearly 5 million jobs from before the outbreak. The US economy has since recovered nearly 17 million jobs, after the pandemic left more than 22 million jobs in the first two months.
This News Originally From – The Epoch Times