us august cpi preview
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- Nothing To Deter Fed From Rate Cut

- Headline Inflation Set To Remain At 1.8pct

- Annual Core Rate Seen Climbing To 2.3pct

- Thursday, 1230 GMT


London, 11 September (LS NEWS) – August’s US headline consumer price index is expected to hold at an annual growth rate of 1.8pct m/m, clearing the path for a Fed rate cut next week.


The annual core inflation rate is forecast to edge up one tenth to 2.3pct in August, which is estimated to result in a 0.3pct rise m/m. The past couple of months have seen readings surprise to the upside but analysts said this is not the start of a new trend due to low inflation expectations.


Last month’s report from the Labour Department showed that US consumer prices increased 0.3pct, which was faster than expected and was lifted by gains in the cost of energy prices and other goods. The CPI had edged up 0.1pct for two consecutive months. On an annualised basis, the CPI increased 1.8pct after advancing 1.6pct in June.


Excluding food and energy components, core CPI gained 0.3pct after rising by the same amount in June. This was the first time since early 2001 that this reading had increased 0.3pct for two straight months. The three-month core rate jumped the most in eight years, supporting Fed Chair Powell’s view that weak inflation readings earlier in the year were caused by transitory factors.


Meanwhile the Fed’s favoured measure of inflation increased in July at the pace expected by analysts for the first time this year. Consumer prices excluding food and energy rose at an annual rate of 1.6pct, although this remains well below the Fed’s 2pct inflation target set in 2012.


This week has seen consumer price expectations fall to new lows according to the New York Fed’s monthly survey which officials look at long with other data on pricing. Consumers’ one-year inflation outlook fell to 2.4pct last month, the lowest print since the survey started in 2013.


Fed officials cited weak inflation as one of the chief concerns behind the decision to lower interest rates in July, the first cut in more than a decade. Investors widely expect another 25-basis point cut when the central bank meets next week on September 17-18.


Inflation has generally remained tame despite the tariff battle between the US and China, which has intensified over the last month. Tariffs on all Chinese imports that started in September target mostly consumer goods, whereas the previous levies were against mostly intermediate products.


-Jamie Dutta

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