Consumer prices rose 0.2 percent in the month of August, the Bureau of Labor Statistics reported Friday, pushing annual inflation up to 1.1 percent.
Friday’s inflation numbers were higher than private-sector forecasters expected, and a sign that long-dormant inflation may be picking up.
“Core inflation,” or all prices minus those for food and energy, edged up to 2.3 percent. Core inflation is given special attention because it is less volatile and often a better predictor of future trends.
Rising shelter costs accounted for much of that increase. Health care prices also pushed up overall inflation, with medical services prices posting the largest one-year increase since January of 2008.
Food and energy prices, meanwhile, were unchanged. August marked the first 12-month period since 2010 that food prices did not rise. Energy prices are down over 9 percent on the year, with gas prices nearly a fifth lower.
Subdued inflation means greater purchasing power for families, who have had to pay less at the gas station and the grocery store in recent months.
But it also is a possible sign that the economy is operating below capacity, in the eyes of Federal Reserve policymakers, and one reason they have shied away from raising interest rates this year. Friday’s release might weigh in favor of the central bank tightening monetary policy at their meeting next week in Washington, although most investors see that as an unlikely possibility overall.
The report is indicative of the kind of rising inflation that the Fed would like to see before raising rates, explained PNC Deputy Chief Economist Gus Faucher, but the Fed “would like clearer evidence that inflation is moving toward the 2 percent target, and so is likely to hold off on a rate hike for now.”
