Rents and food push up consumer prices in the United States

Rents and food push up consumer prices in the United States

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  • The consumer price index increases by 0.1% in August
  • Rents, food and health care explain the rise in the CPI
  • Core CPI jumped 0.6%; increased 6.3% year-over-year

WASHINGTON, Sept 13 (Reuters) – U.S. consumer prices rose unexpectedly in August and core inflation accelerated amid rising rent and health care costs, giving the Federal Reserve ammunition for a third 75 basis point interest rate hike next Wednesday.

The surprisingly firm inflation readings reported by the Labor Department on Tuesday followed recent data showing the resilience of the labor market. Reports suggest that inflation could remain elevated for some time. Fed Chairman Jerome Powell reiterated last week that the central bank was “strongly committed” to fighting inflation. Read more

“August’s further jump in core prices reduces the weaker headline inflation rate spurred by lower gasoline costs,” said Ben Ayers, senior economist at Nationwide in Columbus, Ohio. “That should guarantee another 75 basis point rate hike at next week’s policy meeting as the Fed continues to take a tough stance against inflation.”

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The consumer price index gained 0.1% last month after remaining unchanged in July. A 10.6% drop in gasoline prices was offset by increases in rent, food and health care. Food prices rose 0.8%, with the cost of food eaten at home rising 0.7%. Consumers also paid more for electricity and natural gas.

Economists polled by Reuters had forecast the CPI to fall by 0.1%. In the 12 months to August, the CPI rose 8.3%. Although this is a deceleration from July’s 8.5% rise, inflation is well above the Fed’s 2% target.

Beyond the dilemma the August inflation numbers present to the Fed, they are also a headache for the Biden administration and congressional Democrats hoping to limit their losses in November’s midterm elections. , which should swing the House of Representatives into Republican hands.

Although the annual CPI peaked at 9.1% in June, the highest increase since November 1981, it has remained above 8% for six consecutive months. With just one more CPI report due before Election Day, he is unlikely to drop that handful before Americans head to the polls.

U.S. gasoline prices plunged by an average record above $5 a gallon in June, according to AAA data. They averaged $3.707 a gallon on Tuesday.

US stocks opened lower. The dollar appreciated against a basket of currencies. US Treasury prices fell.

Fed officials meet next Tuesday and Wednesday for their regular policy meeting. Financial markets have nearly priced in a 75 basis point rate hike next Wednesday, according to CME’s FedWatch tool.

The Fed raised its key rate by three-quarters of a percentage point twice, in June and July. Since March, it has taken that rate from near zero to its current range of 2.25% to 2.50%.

Data from last week showed initial jobless claims were at a three-month low. Employment growth was solid in August. There were two job vacancies for every unemployed person on the last day of July.

This is supporting strong wage gains, contributing to higher service prices and keeping underlying inflation high.

Excluding the volatile food and energy components, the CPI rose 0.6% in August after rising 0.3% in July. Economists had forecast the so-called core CPI to rise 0.3%.

Core inflation was also fueled by higher prices for household furnishings and transactions as well as new motor vehicles, car insurance and education.

But there has been a decline in the costs of airfares, communications, and used cars and trucks.

In the 12 months to August, core CPI rose 6.3% after rising 5.9% in July.

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Reporting by Lucia Mutikani; Editing by Chizu Nomiyama and Andrea Ricci

Our standards: The Thomson Reuters Trust Principles.

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