Sept 11 (Reuters) – U.S. consumer prices accelerated in August as the cost of gasoline rebounded after two straight monthly declines, bolstering financial market expectations that the Federal Reserve could raise interest rates next week
The Consumer Price Index increased 0.4% last month after edging up 0.1% in July, the Labor Department’s Bureau of Labor Statistics said on Friday. In the 12 months through August, consumer inflation advanced 3.4% after rising by the same margin in July.
Economists polled by Reuters had forecast the CPI increasing 0.4% over the month and climbing 3.4% year-on-year. Excluding the volatile food and energy components, the CPI rose 0.3% last month after gaining 0.2% in July. The so-called core CPI increased 2.4% year-on-year in August after rising 2.5% in July.
The U.S. central bank tracks the Personal Consumption Expenditures price indexes for its 2% inflation target.
The government reported on Thursday an increase in the Producer Price Index in August, with strong rises in several key components that feed into the calculation of PCE inflation. That added to last week’s robust employment report for August in boosting rate hike prospects next week.
The odds of a rate increase had diminished following comments by Fed Governor Christopher Waller at a Reuters NEXT Newsmaker event last week that he was inclined to argue in favor of keeping rates steady if data confirmed inflation pressures were cooling.
Oil prices climbed back above $100 a barrel on Thursday, while diesel prices are at record highs, suggesting inflation was set to remain elevated and broaden out.
GROWING FRUSTRATION OVER INFLATION
Some economists saw price pressures persisting because of tariffs on imports, most recently against Canada, one of the United States’ top trade partners.
Frustration over higher prices, especially for gasoline and food, has led to a sharp erosion in President Donald Trump’s approval ratings and could cost his Republican party control of the U.S. Congress in the November midterm elections.
After Thursday’s PPI data, economists’ estimates for August’s core PCE price index ranged from as low as a 0.15% gain to as high as a 0.28% increase. Core PCE inflation rose 0.2% in July. Estimates for the year-on-year increase in core PCE inflation ranged from 3.2% to 3.3%. Core PCE inflation advanced 3.3% in the 12 months through July.
The August PCE inflation report will include changes to the methodology, which some economists say could lower the core inflation rate by a couple of basis points.
