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What’s Up with Inflation?

You’ve probably seen yesterday’s news that inflation increased in August, but what’s in the details? NAM Chief Economist Chad Moutray broke down the consumer price data for us.

The numbers: To recap, “Consumer prices edged up 0.1% in August after being flat in July,” said Moutray. “Energy costs fell for the second straight month, down 5.0% in August, with gasoline prices declining 10.6%.”  

  • The consumer price index has jumped 8.3% over the past 12 months but declined from 8.5% in July and 9.1% in June.

However . . . Core inflation, which excludes food and energy prices, increased 6.3% year-over-year in August—worsening from the 5.9% growth rate in July.

  • “Core inflation was not far from the rate seen in March (6.5%), which was the highest since August 1982,” Moutray added.

What it means: “Overall, pricing pressures for consumers remain very elevated, and perhaps more worrisome, core inflation strengthened in August instead of moderating as expected,” said Moutray.

  • “This suggests that solid price growth has continued unabated (at least for now), particularly for food, housing, new vehicles and transportation services, even with some deceleration in energy costs for the month.”
  • “The current forecast is for year-over-year growth in the CPI to be 7.0% at year’s end, with core inflation at 5.5%.”

What’s next? “These data will continue to put pressure on the Federal Reserve to act aggressively and decisively on inflation,” said Moutray. “Indeed, the Federal Open Market Committee is widely expected to increase the federal funds rate by 75 basis points at its Sept. 20–21 meeting, with additional hikes predicted for the Nov. 1–2 and Dec. 13–14 meetings.”

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