NEW YORK (Reuters) – U.S. consumer prices increased by the most in more than a year in August amid a surge in the cost of gasoline, but a moderate rise in underlying inflation could encourage the Federal Reserve to keep interest rates on hold next Wednesday.
The consumer price index increased by 0.6%last month, the largest gain since June 2022, the Labor Department said on Wednesday. The CPI had risen 0.2% for two straight months.
Excluding the volatile food and energy components, the CPI increased 0.3% amid declining prices for used cars and trucks. The so-called core CPI had increased 0.2% for two consecutive months.
STOCKS: U.S. stock futures were down after the inflation data.
FOREX: The dollar index fell 0.01% to 104.560
TREASURIES: The yield on 10-year Treasury notes was up 2 basis points at 4.284%.
KIM FORREST, CHIEF INVESTMENT OFFICER, BOKEH CAPITAL PARTNERS, PITTSBURGH.
“The core came in little hotter, ex-food and energy also came in a little bit hotter … investors were hopeful that this wouldn’t happen.”
“It’s still disappointing to investors because we’d like to see a linear straight line down for inflation.”
“One data point doesn’t make a trend, (the Fed) will not raise in this next quarter or in this next meeting, but instead prefer to have a look at October and November before making their choice to raise again.”
“The number today isn’t so wildly out of expectations that this is going to move them.”
RANDY FREDERICK, MANAGING DIRECTOR, TRADING AND DERIVATIVES, CHARLES SCHWAB IN AUSTIN, TEXAS
“Overall I’d say it was very close to expectations The market reaction is kind of what happens a lot of times, you get an immediate knee jerk reaction typically in the wrong direction and the rebound goes back in the other direction.”
“What the market needs more than anything right now is for most economic data, including this to be pretty close to expectations because if the data is strong, then it implies inflationary pressures, which could lead to tighten more. If the data is too weak, then it implies that perhaps the Fed’s already over tight.”
PETER CARDILLO, CHIEF MARKET ECONOMIST, SPARTAN CAPITAL SECURITIES, NEW YORK
“The topline numbers were in-line, but the core was higher than expected.”
“But there were no major surprises in the report. The market was looking for higher inflation and we got it. But the general trend still looks favorable. Year-over-year core inflation is not moving higher, and the improvement has not been eradicated.”
“I don’t expect too much of a negative market response to this report.”
“I think the Fed will stay on hold. They’re going to wait to see other numbers.”
“Still, while rising fuel costs could be considered transitory, it’s a bit of a setback on a month-to-month basis.”
BRIAN JACOBSEN, CHIEF ECONOMIST, ANNEX WEALTH MANAGEMENT, MENOMONEE FALLS, WISCONSIN”The move higher in headline inflation is a head-fake since it was mostly driven by a huge 10.5% jump in energy commodity prices. The head-fake can still be a headache for the Fed as they have to explain why inflation is trending lower despite what people are seeing at the pump. Shelter inflation is continuing its slide towards something less ridiculous.”
(This story has been refiled to correct the date to Sept. 13)
(Compiled by the Global Finance & Markets Breaking News team)