Consumer inflation in the US rises in August for a second consecutive month

Based on government data released on Wednesday, consumer inflation in the United States increased in August for the second consecutive month, adding pressure on policymakers to address rising prices.

According to the Labor Department, the consumer price index (CPI), a key inflation gauge, rose by 3.7% from a year ago, accelerating from 3.2% in July. However, a measure that excludes volatile components moderated.

The Federal Reserve has been rapidly raising the benchmark interest rate since March of the previous year to curb demand and achieve stable inflation, but the current level remains persistently higher than the stated target of two percent.

“The index for gasoline was the largest contributor to the monthly all items increase, accounting for over half of the increase,” AFP quoted the Labor Department as saying.

The government also noted that the rent-adjusted shelter index continued to rise for the 40th consecutive month.

The CPI increased by 0.6% from July to August, accelerating from the previous month as well.

While the latest report may prompt the Fed to pause for a while, economists believe it is unlikely to result in additional rate hikes.

Ernest and Young’s chief economist, Gregory Daco, told AFP that if the “core” readings consistently weaken, “that will be taken as a sign by the Fed that perhaps further tightening is not necessary.”

Daco stated, “The paradigm for Fed policymakers has shifted away from tightening at all costs to tightening only when certain conditions are being met.”

These conditions include whether domestic demand is stronger than expected and whether the labor market remains more active than expected.

According to Oxford Economics analyst Nancy Vanden Houten, the Fed is likely to place more emphasis on underlying inflation when determining its monetary policy.

“We think they’re going to be quite cautious about lowering rates,” she told AFP. “We think they’re done raising interest rates. We think the risk remains for more rate increases, but we certainly don’t expect one next week,” she said.

The central bank has raised interest rates to their highest level in 22 years. The Federal Reserve’s next move will be to lower interest rates, but Vanden Houten predicted that it won’t happen until the middle of next year.