WASHINGTON (9/17/15)--The U.S. consumer price index (CPI) edged lower by 0.1% in August, reversing the 0.1% gain seen in July, according to the Bureau of Labor Statistics (Economy.com Sept. 16).
Every piece of data that has arrived in advance of the Federal Reserve’s two-day policy meeting, which wraps up today, seems to carry at least some weight on the decision the Fed will make on whether to raise interest rates, analysts say.
Still, experts don’t believe a weak month of consumer price inflation will affect the Fed’s decision.
“The August CPI doesn’t alter either our view that the Federal Reserve will begin normalizing interest rates (this week) or our estimate of third quarter gross domestic product (GDP),” said Ryan Sweet, Moody’s analyst (Economy.com). “The CPI points toward a solid 0.5% gain in real consumption in August, but our high-frequency GDP model’s estimate of third-quarter GDP was unchanged at 1.8% at an annual rate.”
An attenuation in energy prices and a strengthening dollar have put significant downward pressure on consumer prices, Moody’s said, adding, however, that the pressures should not last.
The CPI for food, meanwhile, climbed 0.2% in August, with both food at home prices rising 0.3% and food away from home prices increasing 0.2%.
Excluding food and energy prices, or core CPI, prices rose 0.1%, with apparel prices increasing 0.3%, and new-vehicle prices sitting flat after a 0.2% drop the previous month.
“Some Fed officials, including Vice Chair Stanley Fischer, are optimistic that U.S. inflation will return to the central bank’s 2% target, and they downplay the role of economic slack in downward pressure on prices. This is a shift,” Sweet said. “The Fed consensus usually sees resource slack as driving inflation dynamics.”