Higher gasoline prices seen boosting US inflation in August
WASHINGTON - U.S. consumer prices likely increased by the most in 14 months in August amid a surge in the cost of gasoline, but an expected moderate rise in underlying inflation could encourage the Federal Reserve to keep interest rates on hold next Wednesday.
"It's going to be a mixed picture, with headline inflation picking due to higher gasoline prices and core inflation remaining contained," said Sam Bullard, a senior economist at Wells Fargo in Charlotte, North Carolina."The Fed would be encouraged by the continued moderation trend in core inflation, but it's still too high."
Food prices are expected to have continued rising at a moderate pace. In the 12-months through August, the CPI is forecast to have jumped 3.6% after climbing 3.2% in July. While that would mark the second straight month of a pick up in annual inflation, year-on-year consumer prices have come down from a peak of 9.1% in June 2022. The Fed has a 2% inflation target.
Financial markets overwhelmingly expect the Fed to leave its policy rate unchanged next Wednesday, according to CME Group's FedWatch tool. Since March 2022, the U.S. central bank has raised its benchmark overnight interest rate by 525 basis points to the current 5.25%-5.50% range.
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