The cost of living for American consumers fell for the first time in more than a year in August showing that firms remain unable or unwilling to raise prices and the Federal Reserve's inflation target is still far from being met.
The consumer price index slipped 0.2 percent, the first decline since April 2013 and the core rate, excluding food and energy costs, was flat, according to the Bureau of Labor Statistics today. Both rates had gained 0.1 percent in July and economists were predicting a flat result for CPI and a 0.2 percent rise for the core.
Falling energy costs, the price of a gallon of regular gasoline declined 2.0 percent in August, and slow global economic growth and high levels of unemployment are restraining prices here and around the world.
The Federal Reserve will issue its latest policy pronouncement and assessment of the American economy at 2:00 PM today. Benign inflation, despite massive liquidity injections to the financial system, has permitted the central bank to keep interest rates at historically low levels for over five years. No change in policy is expected today though markets will be closely watching for any hint of when the Fed may begin raising interest rates. Consensus currently has the first increase taking place in about June next year.
Overall consumer prices rose 1.7 percent to the year in August after a 2.0 percent gain in July. Core prices were also 1.7 percent higher following a 1.9 percent increase the prior month; both rate had been forecast to rise 1.9 percent in the Bloomberg poll of economists.
Energy costs fell 2.6 percent in August, the largest amount since March of last year. The nationwide average price of a gallon of gasoline was $3.37 yesterday the lowest since February 18th. Foods prices climbed 0.2 percent in last month following a 0.4 percent gain in July.
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