The latest inflation report from the Department of Labor has shown that prices continued to rise at a fast pace in August, leaving a near-term rate cut by the Federal Reserve unlikely despite President Donald Trump’s recent pressure. According to the latest Consumer Price Index (CPI), published Friday morning, prices rose 0.4 percent last month compared with 0.1 percent in July, as annual inflation remained stalled at 3.4 percent. Both headline results aligned with analyst forecasts.
Similar to past reports, the Bureau of Labor Statistics (BLS), the agency which collects and publishes the figures, said that energy costs accounted for "over one third" of the overall increases in August. The nationwide average for gas prices stood at $4.30 as of Friday morning, according to AAA, up from around $3 before the Iran war began on February 28. Diesel, meanwhile, has climbed to over $6 in recent days, an all-time high.
Core inflation, which excludes the more volatile food and energy categories, quickened to 0.3 percent from 0.2 percent but edged down to 2.4 percent on a year-over-year basis. Ahead of the report, the CME FedWatch tool, which uses 30-Day Fed Funds futures prices to calculate future moves, put the chances of a quarter-point hike at 69 percent. The headline annual rate of 3.4 percent compares to 3 percent when Trump returned to office last January, but is down from its recent peak of 4.2 percent in May.
But as the BLS notes, energy prices and the fallout from Middle East supply disruptions continue to weigh heavily on the data. The agency notes that the overall energy index is up 16.3 percent over the 12 months which ended August, with energy commodities—gas, fuel oil, motor fuels—up 28 percent. The food index increased 0.1 percent in August and has risen by 2.7 percent, slower than overall broader inflation, over the past year.
Food at home (groceries) is up 2.2 percent, though many food groups continue to see outsized gains. Beef, which has for months led the food category in terms of price increases, fell by 0.6 percent between July and August. Trump last month unveiled plans to import 300,000 metric tons of foreign beef to ease domestic supply constraints—a record-low cattle herd, screwworm outbreaks, among others—which had pushed beef prices to an all time high.
The beef and veal index is up 5.9 percent over the past year. This is a developing story.
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