“Overall, there is nothing here to change the Fed’s plans to hold interest rates unchanged at next week’s [Federal Open Market Committee] meeting.”
Deputy chief U.S. economist at Capital Economics, Andrew Hunter, reflecting on the Consumer Price Index (CPI) report for August; the CPI report provides an important read on inflation.
sep 14, 2023
Why It Matters: The Consumer Price Index (CPI) measures a mixed basket of costs of goods and services in the U.S., and is used as an important gauge of inflation (high inflation = your dollar buys you less). Prices in August saw the highest monthly gain of 2023 with an 0.6% increase in prices from July to August. Prices increased 3.7% from a year ago, slightly higher than expected. Energy prices – particularly the surge in gas prices – contributed most significantly to August inflation. Core inflation ("core CPI") – which is seen as a better gauge of inflation because the measure strips out food and energy prices, which can be volatile – showed prices increasing 4.3% over the past year (driven largely by price increases in shelter [rent, housing]).
Important Context: The Federal Reserve references CPI data when deciding the future of interest rates. CNBC explains that "Markets largely expect the Fed to skip a hike at next week's meeting," while The New York Times notes that Fed officials "will probably debate whether one more rate move might be warranted later this year."