WASHINGTON: Monthly US consumer prices unexpectedly rose in August as declining gasoline prices were offset by gains in the costs of rent and food, giving cover for the Federal Reserve to deliver another hefty interest rate increase next Wednesday.
The consumer price index gained 0.1% last month after being unchanged in July, the Labor Department said on Tuesday. Economists polled by Reuters had forecast the CPI dipping 0.1%.
In the 12 months through August, the CPI increased 8.3%. That was deceleration from the July's 8.5% rise. The annual CPI peaked at 9.1% in June, which was the biggest gain since November 1981.
Overall inflation is slowing as goods prices retreat after surging earlier this year amid a loosening of bottlenecks in global supply chains and a shift in spending back to services.
US consumer inflation expectations ease again, NY Fed says
U.S. gasoline prices have plunged from an average record high above $5 per gallon in June, according to data from AAA. They were averaging $3.707 per gallon on Tuesday.
Fed officials gather for their regular policy meeting next Tuesday and Wednesday with inflation remaining way above the U.S. central bank's 2% target. Fed Chair Jerome Powell reiterated last week that the central bank was "strongly committed" to fighting inflation.
Financial markets have almost priced in a 75 basis points rate increase next Wednesday, according to CME's FedWatch Tool. The Fed has twice hiked its policy rate by three-quarters of a percentage point, in June and July. Since March, it has lifted that rate from near zero to its current range of 2.25% to 2.50%.
The inflation report followed data last week showing continued labor market resilience. First-time applications for unemployment benefits are at a three-month low and job growth remains solid. There were two job openings for every unemployed person on the last day of July.
That is supporting strong wage gains, contributing to higher prices for services and keeping underlying inflation elevated.
Excluding the volatile food and energy components, the CPI rose 0.6% in August after advancing 0.3% in July. The so-called core CPI increased 6.3% in the 12 months through August after rising 5.9% in July.
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