Core consumer prices in the US decelerates strongly in August

Core consumer prices in the US rose at the slowest pace in six months in August, suggesting that inflation has likely peaked, though it could remain high for a while amid persistent supply constraints.

The Labor Department said on Tuesday that the consumer price index excluding the volatile components of food and energy rose 0.1% last month. It was the weakest rate since February, after increasing 0.3% in July. On an annual basis, core prices advanced 4.0%, after rising 4.3% in July.

The general index advanced 0.3% last month after rising 0.5% in July. In the 12 months to August, inflation rose by 5.3%, after 5.4% in July on this basis of comparison.

Economists consulted by Reuters projected an increase of 0.3% in core prices and 0.4% in the general index.

Inflation picked up at the beginning of the year, due to higher prices for used cars and trucks, as well as services in sectors most affected by the Covid-19 pandemic.

There are signs that used car and truck prices have already peaked. Hotel and motel costs are now above pre-pandemic levels, suggesting moderate gains ahead.

The slowdown in monthly inflation rates is in line with Federal Reserve chairman Jerome Powell’s assertion that high inflation is transitory.

But supply-chain bottlenecks remain and the job market is tightening, pushing up wages.

The inflation data came amid rising speculation in financial markets about when the Fed will announce the start of scaling back its bond-buying program. Powell offered no signs of when the US central bank plans to scale back its bond purchases, saying only that it could be “this year.”

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