The latest data from the Bureau of Labor Statistics (BLS) reveals that the Consumer Price Index (CPI) rose by 3.7% year-over-year in August.[0] This marks an increase from July's 3.2% and surpasses the forecasted 3.6% rise. The CPI measures the change in prices of a basket of goods and services commonly purchased by households.[1]
While the annual increase of 3.7% is still above the Federal Reserve's target of 2%, it is important to note that it is lower than the peak of 9.1% reached in June 2022.[2] Core CPI, which excludes volatile food and energy prices and is considered a better predictor of future prices, increased by 4.3% over the past 12 months, matching estimates.[3]
The rise in CPI was driven by surging energy prices, with gasoline prices increasing by 10.6% in August alone. Gasoline prices accounted for more than half of the overall inflation increase for the month.[4] Energy prices as a whole rose by 5.6% in August, compared to a 0.1% increase in the previous month.[0]
The shelter index, which includes housing costs, also contributed to the monthly increase in core inflation. It rose by 0.3% in August and has increased by 7.3% over the past year. Rents were up 7.8% year-over-year and 0.3% month-over-month.[5] However, economists expect rent inflation to decrease in the coming months, as new monthly rent prices have slowed down.[6]
Despite the decrease in core inflation, overall inflation remains above the Federal Reserve's target. This, along with rising oil prices and a tight labor market, raises concerns that the Federal Reserve may continue to raise interest rates later this year.[7] However, market participants are currently pricing in a 97% chance that interest rates will remain steady at the September 20 Federal Open Market Committee (FOMC) meeting.[8]
The Federal Reserve has been raising interest rates for over a year in an effort to bring inflation back down to its target of 2%.[9] The next meeting of the FOMC is scheduled for September 19-20, where the decision on interest rates will be made. Economists believe that just one or two more rate hikes may be enough to quash inflation.[5]
Overall, while inflation has decreased from its peak, it remains a concern for the Federal Reserve. The rise in energy prices, particularly gasoline, has contributed to the increase in CPI. The housing market, specifically rents, has also played a significant role in the overall inflation rate. As the Federal Reserve continues to monitor inflation data, the decision on interest rates at the upcoming FOMC meeting will be crucial in determining the future direction of the economy.
0. “Stock Market News Today, 9/13/23 – Stocks Finish Mixed after August's CPI Print – TipRanks.com” TipRanks, 13 Sep. 2023, https://www.tipranks.com/news/stock-market-news-today-9-13-23-futures-rise-ahead-of-august-cpi-print
1. “US inflation in August rose to 3.7% amid sharp increase in energy prices” The Guardian, 13 Sep. 2023, https://www.theguardian.com/business/2023/sep/13/us-inflation-august-rises
2. “August's CPI report is glass half-empty/half-full on inflation” Axios, 14 Sep. 2023, https://www.axios.com/2023/09/13/cpi-report-inflation-august-2023
3. “Gold prices see some selling pressure as U.S. PPI sees sharpest rise in nearly a year, rising 0.7% in August” Kitco NEWS, 14 Sep. 2023, https://www.kitco.com/news/2023-09-14/Gold-prices-see-some-selling-pressure-as-U-S-PPI-sees-sharpest-rise-in-nearly-a-year-rising-0-7-on-August.html
4. “The Acceleration of Inflation in the Second Half Has Begun, “Disinflation” Honeymoon Terminated” WOLF STREET, 13 Sep. 2023, https://wolfstreet.com/2023/09/13/the-acceleration-of-inflation-in-the-second-half-has-begun-disinflation-honeymoon-terminated
5. “What to know about the August inflation spike” The Hill, 13 Sep. 2023, https://thehill.com/business/4202759-what-to-know-about-the-august-inflation-spike/
6. “Here's the inflation breakdown for August 2023, in one chart” CNBC, 13 Sep. 2023, https://www.cnbc.com/2023/09/13/heres-the-inflation-breakdown-for-august-2023-in-one-chart.html
7. “Inflation accelerated in August as oil prices surged” Yahoo Finance, 13 Sep. 2023, https://finance.yahoo.com/news/inflation-accelerated-in-august-as-oil-prices-surged-123228949.html
8. “Gold remains delicate as strong retail spending strengthens US Dollar” FXStreet, 14 Sep. 2023, https://www.fxstreet.com/news/gold-price-subdued-due-to-interest-rate-puzzle-202309140933
9. “Bad news for Biden: Inflation comes in hot” Washington Examiner, 13 Sep. 2023, https://www.washingtonexaminer.com/policy/economy/inflation-ticked-up-august-cpi
