After rising through the early part of the year, inflation cooled throughout the summer.
The Bureau of Labor Statistics reported Wednesday that consumer prices rose 1.7 percent for the year ending in August, the third month in a row that annual inflation has slowed.
The Consumer Price Index fell at a 0.2 percent annual rate in August, adjusted for seasonal variation. The decline was driven by dropping energy prices, especially for gasoline, and was the first monthly drop in the price level since April.
If Wednesday’s report indicates that underlying inflation is trending down, it reduces pressure on the Federal Reserve to raise interest rates and tighten the money supply ahead of inflation rising above the central bank’s target.
Earlier in the year, as a number of metrics of inflation approached the Fed’s target rate of 2 percent, Fed Chairwoman Janet Yellen said the data were “noisy” and that there was no reason to believe that inflation was running hotter than the Fed expected. The Fed’s monetary policy committee meets Wednesday in Washington to set plans for stimulus and interest rates.
Core inflation, a gauge of prices that strips out changes in food and energy, also fell in August, from 1.9 percent to 1.7 percent annually. Core inflation is generally less volatile than headline inflation.
Other price metrics have been mixed in recent months, or shown that the early rise in the inflation rate has leveled off over the year.
The Producer Price Index, which measures the prices received by producers selling goods, registered a 1.8 percent annual rate for August, up a tick from July. Core PPI inflation was unchanged.
Another gauge, the Personal Consumption Expenditures index calculated by the Bureau of Economic Analysis, showed core inflation slowing to just 1.5 percent in July, the most recent month for which data is available. The Fed views core PCE inflation as the most accurate real-time measure of inflation.
