The US inflation rate was stronger than expected in August, according to new data posing a fresh dilemma for the Federal Reserve ahead of next week’s policy meeting.
Consumer prices rose 3.7% year on year, the Bureau of Labor Statistics reported, up from 3.2% in July and higher than consensus forecasts of 3.6%. On a monthly basis, prices increased 0.6%.
More than half of the monthly increase was driven by a jump in petrol prices.
Core inflation, which strips out volatile food and energy costs, was a touch above expectations with a month-on-month gain of 0.3% (consensus 0.2%) bringing the annualised rate down to 4.3% (consensus 4.3%) from 4.7% in July.
Andrew Hunter, deputy chief US economist at Capital Economics thinks the Fed will "look through" the 0.6% m/m jump in headline CPI in August "as it was driven by the recent rally in energy prices."
"Although core prices also rose by a slightly stronger 0.3% m/m, there is little in the report to convince Fed officials that they need to raise interest rates further," he felt.