Consumer prices in the United States slowed in August as inflationary pressures eased.
According to federal data released Tuesday, consumer prices in the United States slowed in August as some of the inflationary pressures brought on by the Covid-19 outbreak receded.
Increasing gasoline and food prices, notably beef, continue to be a political liability for President Joe Biden.
However, with other prices beginning to fall, the Federal Reserve can rest assured that it will not need to tighten monetary policy as soon as next week’s policy meeting.
According to the Labor Department, the consumer price index (CPI) grew only 0.3 percent in August compared to July, while the annual rate fell to 5.3 percent.
Last month, rising gasoline costs remained a major driver of inflation, although the “core” CPI grew just 0.1 percent, the smallest increase since February, according to the report.
Core CPI increased 4% for the past year, three-tenths less than the yearly increase in July.
The month’s gains were slower than projected, and the lessening of price pressures backs up the central bank’s claim that much of the recent inflation spike is attributable to temporary causes that will diminish as the world’s largest economy recovers from the coronavirus shock.
The Federal Open Market Committee (FOMC), which sets the Fed’s policy, meets next week for a two-day meeting, and financial markets are waiting for word on when the central bank would start to taper its stimulus, including its large bond-buying program.
According to economists, as pricing pressures ease, the Fed will not need to move more aggressively and can begin to taper as planned before the end of the year.
“In the following months, pandemic-related impacts will fade even more. And it appears that the impact of supply chain interruptions and shortages is decreasing as well, which is a positive development,” said High Frequency Economics’ Rubeela Farooqi.
“However, inflation readings remain strong enough for the Fed to withdraw emergency support, possibly later this year,” she wrote in a report.
The Fed prefers to see inflation gradually decline toward its 2% target, but has stated that it will accept a higher rate for a while to allow the economy and employment to recover.
The impact of Covid-19, however, can still be seen in the data.
Oil prices have risen in the last three months after plummeting as the virus spread and travel came to a standstill as Americans returned to the roads and planes.
In August, seasonally adjusted gasoline prices increased by 2.8 percent, marking the third consecutive monthly increase. Brief News from Washington Newsday.