Inflation dropped for the second consecutive month in August, but prices remain near a four-decade high as food and housing expenses continue to rise.
In the preceding 12 months, the Consumer Price Index grew 8.3% as rising costs for food, lodging, and medical care were offset by falling gasoline prices. The most recent inflation report indicates a little decrease from July’s 8.5% increase, but it was greater than economists had anticipated, indicating that prices remain uncomfortably high.
The core CPI, which excludes volatile food and fuel costs, increased by 6.3% in August, up from 5.9% in July.
Chris Zaccarelli, chief investment officer of the Independent Advisor Alliance, stated in a note, “Price levels continue to rise, they are not slowing month-over-month (i.e. accelerating, not decelerating), and this inflation problem is not going away quietly.”
As a result of the story, the S&P 500 fell more than 3 percent during morning trading. The Dow fell 2.7%, while the Nasdaq fell 3.9%.
Adobe reported earlier this week that internet prices increased unexpectedly last month, driven by clothes, personal care, and grocery.
Mark Hamrick, senior economic analyst at Bankrate, noted in an email, “The August Consumer Price Index is full of unpleasant surprises.” Prices for necessities, including shelter, food, and medical care, continue to stoke this fire.
He continued, “The significant drop in fuel prices is noteworthy, but it does not solve the inflation problem as a whole.”
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Nonetheless, shoppers anticipate additional price declines later this year. Monday’s study by the New York Fed revealed that consumers anticipate no increase in home prices in 2023, corroborating Goldman Sachs’ forecast that home prices would remain unchanged.
In addition, it is anticipated that the Federal Reserve will continue to raise its benchmark interest rate when it meets later this month. This year, the central bank has hiked the federal funds rate four times in an effort to slow the economy and stop inflation from ballooning out of control. Economists anticipate another 0.75 percentage point increase at the September Fed meeting.
Paul Ashworth, chief U.S. economist at Capital Economics, wrote in a note, “The Fed was already in a hawkish posture, and this data release will do nothing to alter that.” “However, with inflation expectations nearing normal levels, we anticipate that both headline and core inflation will fall more rapidly over the next year than officials presently anticipate.”