August Inflation Report Shows Diverging Overall and Core Rates

Brian Turner
13 Sep, 2023
New York City

Overall inflation accelerated for the second month in August to 3.7% from 3.2% in July, the U.S. Bureau of Labor Statistics reported Wednesday. 

The inflation picked up following the increase in oil prices in the last two months and weaker comparison from the previous year and cost of transportation services picked up in the month. 

Core inflation, which excludes energy and food prices, slowed for the fifth month in a row to 4.3% from a year ago and rose 0.3% from the previous month. 

Higher gas prices dominated the overall price increases but core inflation rate rose at the slowest pace in two years, but still faster than the Fed's target of 2%. 

On a monthly basis, overall inflation rose 0.6%, the largest increase in more than a year after gasoline prices jumped 10.6% from the previous month. 

Gasoline prices at pump stations have at least stabilized in the last two weeks and the AAA said gasoline prices averaged $3.84 on Tuesday, nearly unchanged from the  previous month.  

The inflation data measured by the government understates the price increases faced my most urban families with children. The government data vastly understates housing price inflation and cost of shelter in most urban cities across the nation.  

Overall inflation faced my most families, when including home price inflation, could run into upper double digits. 

The yield on U.S. Treasury bonds and notes were nearly unchanged after the release of consumer price inflation data and focus shifted to wholesale price inflation data scheduled to be released on Thursday. 

Despite multiple interest rate hikes over the last sixteen months, inflation has cooled largely because of base effect and rate of price increases has stayed above the Fed's preferred target range of 2%.