Inflation youfell to 8.3% for the 12 months ending in August, according to the consumer price index, warmer than expected but still down from the previous month.
Highly anticipated figures released Tuesday by the Bureau of Labor Statistics revealed that although it has slowed, inflation is still high despite the Federal Reserve’s aggressive interest rate hikes. July headline CPI was 8.5%.
COMING RECESSION? FOUR TRADITIONAL INDICATORS — AND FOUR STRANGE INDICATORS
Soaring inflation has eaten away at President Joe Biden’s approval ratings as he and Democrats approach midterm elections.
The so-called core CPI, which excludes volatility in food and energy prices, rose 0.6% in August, more than expected and more than the previous month. The figure shows that inflation is still a major concern for the Fed and for households.
The gasoline index fell 10.6% in August, offsetting increases in food and shelter costs. The energy index fell 5% on the month, but is still up 23.8% for the 12 months to August. Food prices rose more than 11% over the same period, according to the report.
“The new numbers contradict expectations of a continued moderation in inflation,” said Victor Claar, an economics professor at Florida Gulf Coast University. Washington Examiner. “Underlying inflation was the biggest surprise today. …While gasoline prices have fallen, they are not falling fast enough to overcome price inflation in most spending categories. consumption. Working families see no relief yet.”
Consumer prices have risen rapidly since last August, especially for basics like food and gasoline.
Tuesday’s CPI report comes as the central bank tries to raise interest rates aggressively to dampen consumer demand and therefore lower prices.
In July, following a two-day meeting, central bank officials announced that the Fed would raise its interest rate target by three-quarters of a percentage point. The central bank typically raises rates by just a quarter of a percentage point, so the decision was analogous to three simultaneous rate hikes, showing how keen the Fed is to keep inflation under control.
The July rate hike came after the Fed raised rates by the same massive margin in June and made two more rate hikes in March and May.
The Fed is due to meet later this month to decide the size of its next rate hike. Most investors are betting the increase will hit another 75 basis points, although central bank officials are watching Tuesday’s CPI report closely to determine their next moves.
Falling gasoline prices are one of the main factors driving down the overall inflation figure. The average price of gasoline in the United States broke records in June, topping $5 a gallon, according to AAA. Since then, oil prices have cooled and gas is now averaging $3.72 a gallon.
Some fear that the Fed’s aggressive rate hike could tip the United States into a recession.
GDP fell at an annualized rate of 0.6% in the second quarter, according to a revised estimate from the Bureau of Economic Analysis. The figures come after negative GDP growth of 1.6% in the first quarter. Many economists have traditionally viewed two quarters of negative GDP growth as a period of recession.
CLICK HERE TO LEARN MORE ABOUT THE WASHINGTON EXAMINER
However, some indicators are pushing back against the idea that the economy is in recession – the most important being the country’s surprisingly resilient job market.
The economy beat forecasts and created 315,000 jobs in August. The unemployment rate is also still quite low at 3.7%, just a little higher than it was when the economy was booming just before the pandemic.