Inflation increased by more than previously expected in August. However, while food prices continue to be high, the large decline in gasoline prices is offsetting those costs.
On Tuesday the Labor Department said that the consumer price index rose by 8.3% in August by comparison to a year ago. Between July and August prices also rose by 0.1%>
These figures are both higher than the expected 8.1% figure or the 0.1% monthly decline forecast that Refinitiv economist has noted. This can be worrisome for the Federal Reserve as they are going to try to limit consumer demand through another aggressive interest rate hike.
Stocks have also sunk, with the Dow Jones Industrial Average going down by more than 1,000 points on Tuesday afternoon.
Core prices, that is food and energy are also higher by 6.3% when compared to the prices last year. This is higher than the 6.1% expected by economists.
Core prices also rose by more than what was expected as prices spiked by 0.6% in August. This is a bigger increase than the ones we had in April, May, June, and July.
This could also add more inflationary pressure to the economy.
According to Jason Reed, an assistant chair and professor of finance at the University of Notre Dame’s Mendoza College of Business, the CPI report shows that inflation pressure is remaining high even though economists had previously hoped it would cool down, especially because of the large decline in gas and energy prices.
However, food and healthcare pricing has remained high.
The fastest increases caused by inflation can be seen in food, rent, energy, cars, and travel, and transportation.