Announced this morning, the Consumer Price Index increased 0.6% in August, as expected and is four-tenths higher than the previous month. It grew 3.7% on an annual basis, above the 3.2% annual level in the previous report. Monthly prices for Gasoline, up 10.6%, were relatively strong, while monthly prices for Used Cars and Trucks, down -1.2%, were relatively weak. The core rate, which excludes prices for food and energy, increased 0.3% in August, slightly higher than expected and one-tenth higher than the previous month. It increased 4.3% on an annual basis, as expected and lower than the annual level the previous month.
Overall, headline inflation moved higher in August, driven primarily by energy prices as production cuts were announced by oil producing nations overseas. Core inflation on a month-over-month basis ticked only slightly higher in August and the annual level came down to 4.3%. While the Federal Reserve may be content to keep rates at current levels for now, they will likely keep a restrictive stance on policy to see continued progress of core rates moving down toward their 2% annual target. Amidst this process, whether the labor market can remain resilient, consumers can continue to spend with elevated inflation, and companies can successfully navigate the changing environment will be key for the economy and markets in the coming months.
In all, the 10-year US treasury yield initially ticked higher following the report but is now slightly lower and equity futures are lower as we head into the market open.
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