Consumer prices rose 3.7% in the 12-month period ending in August, registering their largest monthly increase since January thanks largely to surging prices at the pump, though one key inflation metric came in at its lowest level in nearly two years amid the Federal Reserve’s war on price increases.
The consumer price index jumped 0.6% from July to August, according to the Labor Department report released Wednesday morning, coming in far hotter than the previous 0.2% increase and meeting consensus economist estimates of a 0.6% rise.
August’s 3.7% headline inflation is the highest since May but far below the 8.3% mark seen a year ago.
Surging energy prices were the greatest contributor to last month’s price increase, according to the government, as gasoline prices jumped nearly 11% from July.
But core inflation, which excludes the more fickle food and energy indexes, came in at 4.3% last month, hitting its lowest level since September 2021 and also matching economist estimates of 4.3%.
Stocks were unchanged immediately after the release.
The same CPI release a year ago preceded the most brutal stock market crash in years: The S&P 500 crashed 4.3% on September 13, 2022, its worst day since March 2020, after data revealed inflation was far worse in August 2022 than expected.
The overall consumer price index basket is up about 11% since September 2020, while Americans’ average hourly wages are up about 9% over that stretch, according to Labor Department data. Inflation surged to as high as 9.1% last summer, its highest level since 1981, trailing a post-pandemic surge in a host of goods and services and a massive swing in energy prices related to Russia’s invasion of Ukraine. Price increases finally moderated as the economy digested a historic 11 interest rate hikes by the Fed over the last 18 months.
What To Watch For
How the self-proclaimed “data-dependent” Fed reacts to the latest inflation data. The Fed’s policy-setting committee will meet next Tuesday and Wednesday to determine whether it will tweak rates. The futures market prices in a 93% probability the central bank will keep the federal funds rate steady at 5.25% to 5.5%, according to CME Group data.