An inflation gauge closely tracked by the Federal Reserve accelerated in August, boosted mainly by higher gas prices, but measures of underlying inflation slowed in the latest sign that overall price pressures are still moderating, the Associated Press reports.
Today’s Commerce Department report showed that prices rose 0.4% from July to August, up from just 0.2% the previous month. Compared with a year earlier, prices rose 3.5% in August, up from 3.4% year-over-year increase in July. It was the second straight rise in the year-over-year figure, which has tumbled from its 7% peak in June 2022 but still exceeds the Fed’s 2% inflation target.
A sharp increase in gas costs drove the August price increase, just as it did in the more widely-followed consumer price inflation figures that the government issued earlier this month.
Excluding the volatile food and gas categories, however, “core” inflation remained comparatively tame in August, evidence that it’s continuing to cool, though more slowly than it had been earlier this year. Fed officials pay particular attention to core prices, which are considered a better gauge of where inflation might be headed.
Core prices rose just 0.1% from July to August, down from July’s 0.2%. Compared with a year ago, core prices rose 3.9%, down from July’s year-over-year increase of 4.2%.
The latest data coincides with rising hopes among Fed officials that they may be able to bring inflation back to their target without driving up unemployment or causing a recession as many economists have feared. When the Fed released its quarterly economic forecasts last week, it showed that the central bank’s policy makers envision only a small rise in unemployment by the end of 2024. They expect joblessness to rise from its current 3.8% to a still-low 4.1%, along with a gradual drop in core inflation to just 2.6%.
Still, threats to a so-called “soft landing” — in which inflation would fall back to the Fed’s 2% target without a deep recession — have been growing. Congress is on track to shut down parts of the government by this weekend because a group of hard-right House Republicans have blocked a spending agreement.
