CPI Report August 2023: Inflation up 0.3%

Inflation recorded its biggest monthly increase in August this year.

The consumer price index, which measures spending on a wide variety of goods and services, rose a seasonally adjusted 0.6% for the month, and was up 3.7% from a year earlier. According to the US Department of Labor Wednesday. Economists polled by Dow Jones had expected increases of between 0.6% and 3.6%.

However, core CPI excluding volatile food and energy rose by 0.3% and 4.3%, respectively, against estimates of 0.2% and 4.3%. Federal Reserve officials pay close attention to the center because it provides a better indication of where inflation is headed over the long term.

Energy prices led the biggest gains, rising 5.6% on the month, which included a 10.6% rise in gasoline.

Food prices rose 0.2%, while accommodation costs, which make up a third of the CPI weight, rose 0.3%. Within accommodation, rents in the accommodation primary residence index rose 0.5% and were up 7.8% from a year ago. Equity rent for owners, a key measure of what homeowners believe they can get for rent, rose 0.4% and 7.3%, respectively.

Elsewhere in the report, airfares rose 4.9%, but were down 13.3% from a year ago. Used vehicle prices, the main contributor to inflation, fell 1.2% in 2021 and 2022, down 6.6% year-on-year. Transport services rose 2% on the month.

According to Lisa Sturtevant, chief economist at Pride MLS, excluding lodging from the CPI would increase by only 1% per year.

“Housing continues to contribute to inflationary measures,” Sturtevant said. “Rent growth slowed significantly and average rents nationally fell year-on-year in August. … However, aggregate rent trends shown in CPI measures will take several months to take into account, and the central bank will have to take that into account when they meet later this month to decide on interest rate policy,” he said. ‘data-driven’ approach.”

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Stock market futures initially fell following the report and then recovered. Treasury yields were higher across the board.

The rise in inflation affected the wages of workers. Real average hourly earnings fell 0.5% for the month, although they were up 0.5% from a year ago, the Labor Department said. In a separate publication.

The data comes as Federal Reserve officials look to adopt a longer-term approach to tackling inflation.

In a series of hikes that began in March 2022, the central bank raised its benchmark lending rate by 5.25 percentage points in the summer of 2022 in an effort to tackle inflation that has been rising for more than 40 years.

Recent comments from officials point to a more cautious approach. While policymakers may want to exaggerate monetary policy tightening, they now see risks as more even and appear more cautious about future hikes.

“Overall, there is nothing here to change the central bank’s plans to keep interest rates unchanged next week. [Federal Open Market Committee] crowd,” wrote Andrew Hunter, deputy chief US economist at Capital Economics.

Markets are widely expecting the central bank to avoid a hike at next week’s meeting. Futures pricing remains volatile beyond that, with traders placing a 40% probability of a final hike in November, according to CME Group data.

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