Inflation Got here in Quicker Than Anticipated in August Whilst Fuel Costs Fell


Prices climbed 0.1 percent from July as rapid increases hit a variety of products and services, including food away from home, new cars, dental care and vehicle repair. Given how much gas prices fell in August, the price index had been forecast to decline on a monthly basis.

Inflation FAQ

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What is inflation? Inflation is a loss of purchasing power over time, meaning your dollar will not go as far tomorrow as it did today. It is typically expressed as the annual change in prices for everyday goods and services such as food, furniture, apparel, transportation and toys.

What causes inflation? It can be the result of rising consumer demand. But inflation can also rise and fall based on developments that have little to do with economic conditions, such as limited oil production and supply chain problems.

Is inflation bad? It depends on the circumstances. Fast price increases spell trouble, but moderate price gains can lead to higher wages and job growth.

Can inflation affect the stock market? Rapid inflation typically spells trouble for stocks. Financial assets in general have historically fared badly during inflation booms, while tangible assets like houses have held their value better.

The upshot is that inflation retains a surprising amount of underlying momentum, which is bad news for Fed officials. Central bankers have been looking for a sustained slowdown in price increases as evidence that their policies are working to cool demand and nudge the economy back toward a healthy environment in which inflation is slow, steady and barely noticeable.

Until that happens, officials have pledged to continue raising interest rates quickly, which can slow borrowing, constrain consumer demand and tamp down hiring and wage growth.

“Inflation is far too high, and it is too soon to say whether inflation is moving meaningfully and persistently downward,” Christopher Waller, a Fed governor, said in a speech last week. “This is a fight we cannot, and will not, walk away from.”

So far, there is little sign that the Fed’s efforts are tanking consumer and business demand. Growth has slowed, but it has not plummeted, and both hiring and wage gains remain rapid. Employers added 315,000 jobs last month, job openings remain high and consumer spending has continued to eke out gains, albeit decelerating ones, this summer.

“Inflation remains hot, financial conditions have seen some improvement and the labor markets are humming along,” Neil Dutta, head of US economics at Renaissance Macro, wrote in a research note after the release. “If the goal is to slow things down and create some pain, the Fed is failing by its own standard.”