US consumer inflation rises on gasoline prices

Consumer inflation in the United States picked up in August for a second straight month, according to government data released Wednesday, putting the heat on policymakers as they work to lower prices, Agence France Presse (AFP) reported.

The consumer price index (CPI), a key inflation gauge, jumped 3.7% from a year ago, picking up pace from July’s 3.2% figure, said the Labor Department, but a measurement stripping out volatile segments cooled.

All eyes are on the report, which is expected to have a bearing on the US central bank’s interest rate decision released next week.

The Federal Reserve has lifted the benchmark lending rate rapidly since March last year to tamp down demand and sustainably lower inflation — but the current figure remains stubbornly above officials’ 2% goal.

In August, higher gasoline costs bumped up headline inflation but the “core” reading — removing the volatile food and energy components — cooled to 4.3% on an annual basis.

“The index for gasoline was the largest contributor to the monthly all items increase, accounting for over half of the increase,” said the Labor Department.

The department added that the shelter index, which takes into account rent, continued advancing — rising for a 40th consecutive month.

Between July and August, CPI rose 0.6%, accelerating from the prior month too.

While the latest report could give the Fed some pause, analysts expect it may not translate to further rate hikes.

If “core” readings continue to weaken, “that will be taken as a sign by the Fed that perhaps further tightening is not necessary,” said Gregory Daco, EY chief economist.

Speaking to Reuters, Phillip Neuhart, director of market and economic research at First Citizens Bank in Raleigh, North Carolina, echoed that assessment, and said: “August saw a gain in core inflation, while increased gasoline prices helped push headline inflation even higher compared to the prior month. The Fed is likely to keep the federal funds rate unchanged at this month's meeting, but today's report keeps alive the potential for another interest rate hike in coming months.”