August CPI report shows inflation remained at 3.4%, slightly hotter than expected
Inflation held steady in August, with consumer prices rising 3.4% from a year earlier, matching July’s pace but coming in slightly higher than economists had forecast.
By the numbers
Economists polled by FactSet expected inflation to rise in August at an annual rate of 3.3%.
The CPI, a basket of goods and services typically bought by consumers, tracks changes in prices over time.
The highly anticipated CPI report could help determine the direction of the Federal Reserve’s interest rate decision, set for Wednesday, Sept. 16. Fed Chairman Kevin Warsh indicated in a speech last month at Jackson Hole that reining in price pressures remains the Fed’s primary focus and that the central bank will “have work to do” if inflation doesn’t fade.
Energy prices have continued to rise in recent weeks amid an escalation of hostilities in the Iran war, with diesel hitting a painful new milestone of $6 a gallon on Thursday. Because diesel powers the trucks and railroads that transport goods around the U.S., the surge could ripple through the economy as businesses hike prices to offset their higher energy costs.
The national average for a gallon of diesel rose to a record $6.06 on Friday, up more than 60% from $3.71 a year ago, according to data from AAA.
The price of gasoline has also continued its recent rapid rise as well, hitting a national average of $4.30 a gallon on Friday, AAA reported.
“The No. 1 issue in the economy is inflation. The Federal Reserve is focused on it and so is Main Street,” said Heather Long, chief economist at the Navy Federal Credit Union, in an email before the CPI data was released. “The growing problem for the Fed is that there’s no end in sight for the war in Iran and oil reserves are only getting lower.”
