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WASHINGTON: Underlying consumer prices in the United States rose sharply in August, resulting in the largest annual gain in a year, but it is unlikely that rising inflation will deter the Fed from lower interest rates next week to support the slowdown in the economy.
The Labor Department said Thursday (September 12th) that its consumer price index excluding volatile components of food and energy products rose 0.3% for a third consecutive month. The so-called core CPI has been boosted by rising health costs and rising prices for airline tickets, recreational vehicles and used cars and trucks.
During the 12-month period ending in August, the core CPI rose 2.4%, its highest since July 2018, following a 2.2% increase in July.
Economists polled by Reuters had forecast that the core CPI would rise by 0.2% in August and 2.3% yoy.
But falling energy prices limited the increase in the overall CPI to 0.1% last month. The CPI rose 0.3% in July. In the last 12 months of August, the CPI rose 1.7% after increasing 1.8% in July.
The Fed, whose inflation target is 2%, follows the basic price index of personal consumption expenditure (PCE) monetary policy. The base price index of JCP increased 1.6% in July compared with the previous year and did not reach the target set this year.
Economists expect inflation to accelerate in the coming months and exceed its target by 2020 following the enlargement this month of the customs duties imposed by the United States on Chinese products to include a range of consumer goods. Nevertheless, the Fed should continue to cut interest rates this year to offset the slowdown in the economy caused by the one-year trade war between the EU and China.
The clash of trade, which has weakened business confidence and plunged the US and global manufacturing sector into recession, threatens the longest economic expansion in history.
While Fed Chairman Jerome Powell said last week that he was not planning a recession, he reiterated that the US central bank would continue to act "appropriately" to maintain the economy. 39, currently expanding to its 11th anniversary.
The financial markets fully took into account a rate cut at the Fed's policy meeting on 17 and 18 September. Most economists expect further easing of monetary policy in October and December. The Fed lowered rates in July for the first time since 2008. In August, gasoline prices fell 3.5% after rebounding 2.5% in July. Food prices remained unchanged for three consecutive months. Food consumed at home decreased by 0.2%.
The rent equivalent to the homeowners' rent, which is what an owner would pay to rent or get to rent a house, increased by 0.2% in August for the second consecutive month.
Health care costs jumped 0.7% in August, the largest increase since August 2016, following a 0.5% gain in July. Clothing prices rose 0.2% after rising 0.4% the previous month. At the beginning of the year, the government introduced a new method and new data to calculate the cost of clothing.
Prices for motor vehicles and used trucks rose 1.1% in August. They have now increased for three consecutive months. Prices for new motor vehicles declined 0.1%. The cost of furniture and household operations has decreased.
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