In This Article:
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Consumer prices forecast increasing 0.6% in August
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CPI expected to rise 3.6% year-on-year
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Core CPI seen gaining 0.2%; advancing 4.3% year-on-year
By Lucia Mutikani
WASHINGTON, Sept 13 (Reuters) - U.S. consumer prices likely increased by the most in 14 months in August amid a surge in the cost of gasoline, but an expected moderate rise in underlying inflation could encourage the Federal Reserve to keep interest rates on hold next Wednesday.
The consumer price report from the Labor Department on Wednesday will be published a week before the Fed's rate decision. It would follow on the heels of data this month showing an easing in labor market conditions in August.
Prices outside the volatile food and energy categories, the so-called core inflation, were likely tame for a third straight month, with the year-on-year increase forecast to have been the smallest in nearly two years.
"It's going to be a mixed picture, with headline inflation picking due to higher gasoline prices and core inflation remaining contained," said Sam Bullard, a senior economist at Wells Fargo in Charlotte, North Carolina. "The Fed would be encouraged by the continued moderation trend in core inflation, but it's still too high."
The consumer price index likely increased by 0.6% last month, according to a Reuters survey of economists. That would be the largest gain since June 2022 and would follow two straight monthly advances of 0.2%.
Gasoline prices accelerated in August, peaking at $3.984 per gallon in the third week of the month, according to data from the U.S. Energy Information Administration. That compared to $3.676 per gallon during the same period in July.
Food prices are expected to have continued rising at a moderate pace. In the 12-months through August, the CPI is forecast to have jumped 3.6% after climbing 3.2% in July. While that would mark the second straight month of a pick up in annual inflation, year-on-year consumer prices have come down from a peak of 9.1% in June 2022. The Fed has a 2% inflation target.
The core CPI, excluding food and energy, is forecast to have increased 0.2% for a third straight month amid declining prices for used cars and trucks. Though rents continued to increase, the trend is cooling and a further slowdown is expected as more apartment buildings come on the market.
In the 12 months through August, the core CPI is forecast to have increased by 4.3%. That would be the smallest year-on-year rise since September 2021 and would follow a 4.7% gain in July.
Financial markets overwhelmingly expect the Fed to leave its policy rate unchanged next Wednesday, according to CME Group's FedWatch tool. Since March 2022, the U.S. central bank has raised its benchmark overnight interest rate by 525 basis points to the current 5.25%-5.50% range.