- Surprising Surge: US Consumer Prices Rise Beyond Expectations
- Inflationary Challenges Persist Despite the Central Bank’s Actions
- Fuel Prices and Housing Costs Drive August’s Inflation Spike
Consumer prices in the US rose by more than expected last month, led by higher costs for rent and fuel.
The inflation rate, which measures the rate of price increases, increased from 3.2% in July to 3.7% in August, according to the Labour Department.
The numbers show regulators’ struggles to stabilise prices, which climbed at the fastest rate in decades last year.
Since last year’s apex, the rate of inflation has declined significantly.
The US central bank, which seeks to keep inflation at 2%, will likely remain concerned, according to analysts, because the issue has not been resolved.
To control inflation, the bank raised its benchmark interest rate to its highest level in 22 years, 5.25–5.5%.
It is scheduled to convene later this month to determine if additional increases are necessary.
According to a Wednesday survey, petrol prices drove up consumer costs from July to August. The 0.6% monthly rate of inflation was the greatest since June 2022.
Even after excluding food and petroleum, where price fluctuations are common, prices increased by 0.3%, exceeding expectations.
For the fortieth consecutive month, housing costs, which many analysts had predicted would begin to decline this year and which comprise a significant portion of the US consumer price index, also increased.
The Federal Reserve is unlikely to raise interest rates at its upcoming meeting, according to analysts, particularly since rate hikes have little impact on fuel prices, which were the largest contributor to August’s inflation increase.
Charles Hepworth, investment director at GAM Investments, a Zurich-based asset management firm, said that Wednesday’s data could prompt the Fed to act later this year.
He said the newest economic statistics won’t convince the Fed that the planned economic cooling is imminent.
“Prices of energy are beyond their control. Despite this, we should still anticipate an increase in November.”
Higher interest rates chill the economy by encouraging saving and making it more difficult for households and businesses to obtain loans for home purchases, business expansions, and other expenditures. Theoretically, price increases should moderate as the economy contracts.
Jerome Powell, chairman of the Federal Reserve, warned last month that inflation remained “too high” despite the Fed’s efforts.
“We are prepared to increase rates further if necessary and intend to maintain a restrictive monetary policy until we are confident that inflation is moving sustainably towards our target,” he said.
