CPI report August 2023: Inflation rose 0.3%

Inflation posted its biggest monthly increase this year in August as consumers faced higher prices on energy and a variety of other items.

The consumer price index, which measures costs across a broad variety of goods and services, rose a seasonally adjusted 0.6% for the month, and was up 3.7% from a year ago, the U.S. Department of Labor reported Wednesday. Economists surveyed by Dow Jones were looking for respective increases of 0.6% and 3.6%.

However, excluding volatile food and energy, core CPI increased 0.3% and 4.3% respectively, against estimates for 0.2% and 4.3%. Federal Reserve officials focus more on core as it provides a better indication of where inflation is heading over the long term.

Energy prices fed much of gain, rising 5.6% on the month, an increase that included a 10.6% surge in gasoline.

Food prices rose 0.2% while shelter costs, which make up about one-third of the CPI weighting, increased 0.3%.

Stock market futures initially fell following the report then rebounded. Treasury yields were higher across the board.

The jump in headline inflation hit worker paychecks. Real average hourly earnings declined 0.5% for the month, though they were still up 0.5% from a year ago, the Labor Department said in a separate release.

The data comes as Federal Reserve officials are looking to stake out a longer-term approach to solving the inflation problem.

In a series of increases that began in March 2022, the central bank has boosted its benchmark borrowing rate by 5.25 percentage points in an effort to tackle inflation that had been running at a more than 40-year high in the summer of 2022.

Recent remarks from officials have indicated a more cautious approach ahead. Whereas policymakers had preferred to overdo monetary policy tightening, they now see risks more evenly balanced and appear more cautious about future hikes.

Markets largely expect the Fed to skip a hike at next week’s meeting. Futures pricing has been volatile beyond that, with traders putting about a 44% probability of a final hike in November, according to CME Group data.

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