Energy
Wednesday, September 11th, 2024 4:35 pm EDT
Key Points
- Overall Inflation Trends: Inflation in the U.S. continued to decrease in August, with the consumer price index (CPI) rising by 2.5% from the previous year. This marks a significant drop from the 9.1% peak in mid-2022 and the lowest inflation rate since February 2021. The trend indicates that inflationary pressures are easing, with prices for groceries and gasoline stabilizing. However, there are still concerns about housing costs, which remain high despite a general decrease in overall inflation.
- Federal Reserve Policy and Economic Outlook: The U.S. Federal Reserve is expected to cut interest rates in response to the cooling job market and lower inflation. This shift comes after the Fed raised rates to their highest level in 23 years to combat inflation. Economists predict a quarter-point reduction in the upcoming policy meeting, reflecting a transition from focusing solely on inflation control to addressing potential recession risks.
- Housing Inflation and Data Discrepancies: Housing costs continue to exert upward pressure on inflation, with the shelter index rising 5.2% since August 2023, contributing significantly to the core CPI. Although real-time rental market data shows minimal inflation and even a decrease in average rents, the CPI for shelter has been persistently high. This discrepancy is attributed to the slow-moving nature of housing inflation data and may eventually align with broader rental market trends.
Inflation in the U.S. continued to ease in August, marking a significant decrease from the peak levels experienced during the pandemic. The consumer price index (CPI) rose by 2.5% year-over-year in August, down from 2.9% in July and the lowest since February 2021. This marks a substantial decline from the 9.1% peak in mid-2022, which was the highest inflation rate since 1981. Despite the overall trend toward lower inflation, there are still concerns, particularly with housing costs, which have remained stubbornly high. Sarah House from Wells Fargo Economics and Paul Ashworth from Capital Economics both noted that while inflation appears to be under control, it is not entirely eliminated, especially with persistent housing inflation.
Housing costs remain a significant challenge, contributing more than 70% of the annual increase in core CPI, which excludes food and energy prices. The shelter index has risen by 5.2% since August 2023, and while real-time rental data shows minimal inflation, the CPI for shelter continues to rise slowly, creating a disconnect between real-time market conditions and reported inflation. Economists are puzzled by this discrepancy but expect housing inflation to eventually slow down in line with broader rental market trends.
The Federal Reserve, which had previously raised interest rates to combat high inflation, is now expected to shift focus toward preventing a potential recession. With inflation cooling and the job market softening, a quarter-point rate cut is anticipated in the upcoming policy meeting. Other categories of inflation, such as motor vehicle insurance and medical care, have seen notable increases, but overall consumer prices have stabilized. Grocery prices, which had surged in 2022, are now rising at less than 1% annually, and gasoline prices have decreased by about 10% over the past year.
For the full original article on CNBC, please click here:https://www.cnbc.com/2024/09/11/heres-the-inflation-breakdown-for-august-2024-in-one-chart.html
