The US Commerce Department said on Wednesday that prices rose 3.4 percent in August from the same month a year earlier, below economists’ forecast of 3.7 percent, while the monthly increase was 0.3 percent, compared with 0.1 percent in July.
Core inflation below expectations
Excluding the volatile energy and food sectors, core inflation rose 3 percent in August from the same month a year earlier, coming in below expectations.
On a monthly basis, core prices rose 0.2 percent in August, compared with 0.1 percent in July. Despite the annual slowdown, inflation remained above the Federal Reserve’s 2 percent target.
Markets bet on a delay to rate hikes
US markets rose immediately after the data were released, as investors bet that the Federal Reserve could delay an expected interest-rate hike.
The Federal Reserve raised its short-term benchmark interest rate two weeks ago for the first time in three years in an effort to combat inflation. Most economists expect at least one more rate hike this year, possibly by late October.
“Inflation is moving lower, but it is still well above the target and is showing no improvement,” said Bill Adams, chief US economist at Fifth Third Commercial Bank.
An indicator watched by the Federal Reserve
The report covered the personal consumption expenditures price index, a key inflation measure closely watched by the Federal Reserve. The data came as elevated prices continued to weigh on the US economy despite strong growth and a low unemployment rate.
