| 27 September 2023, Wednesday |

US consumer inflation rises to 3.7 per cent in August: Report

According to government data released on Wednesday, consumer inflation in the United States has increased for the second consecutive month in August. This trend is putting additional pressure on policymakers to take measures aimed at reducing prices.
According to the Labour Department, the consumer price index (CPI), a crucial inflation indicator, increased by 3.7 per cent from a year ago, accelerating from 3.2 per cent in July. However, a measurement that removed volatile parts cooled.

The Federal Reserve has rapidly increased the benchmark lending rate since March of last year in an effort to reduce demand and stably cut inflation, but the present level is persistently higher than the two percent stated target.
“The index for gasoline was the largest contributor to the monthly all items increase, accounting for over half of the increase,” AFP quoted the Labor Department as saying.

The government also noted that the rent-adjusted shelter index continues to rise for the 40th straight month.

The CPI increased by 0.6 per cent from July to August, speeding up from the previous month as well.

While the most recent report may cause the Fed to pause for a while, economists believe it is unlikely to result in additional rate increases.

Ernest and Young chief economist Gregory Daco told AFP that should the “core” readings weaken consistently, “that will be taken as a sign by the Fed that perhaps further tightening is not necessary.”

“The paradigm for Fed policymakers has shifted away from tighten at all costs to tighten only as certain conditions are being met,” Daco stated.

Included in these circumstances are whether or not domestic demand is stronger than anticipated and whether the labour market is still active than anticipated.

According to Oxford Economics analyst Nancy Vanden Houten, the Fed will likely place more emphasis on underlying inflation when determining its monetary policy.

“We think they’re going to be quite cautious about lowering rates,” AFP quoted her. as saying

“We think that they’re done raising interest rates. We think the risk remains for more rate increases, but we certainly don’t expect one next week,” she said.

The central bank has increased interest rates to their highest level in 22 years. The Federal Reserve’s next action will be to lower interest rates, but Vanden Houten predicted that won’t happen until the middle of next year.

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