September 14, 2020 –CPI Increases 0.4 Percent in August

SEPTEMBER 14, 2020 – CPI INCREASES 0.4 PERCENT IN AUGUST

The consumer price index rose 0.4 percent last month, with rises in the price of gasoline, recreation, household furnishings and used cars being the primary contributors.  In the running 12-months, CPI is now up 1.3 percent after increasing 1.0 percent in the 12-months through July. The data beat economists’ expectations for a 0.3 percent monthly and 1.2 percent increase yearly.

Underlying inflation has started to take hold, but this will have no impact on monetary policy.  The Fed adjusted their framework last month, emphasizing a solid labor market over rising inflation, as the driver of interest rates.  The Fed new theory of “flexible average inflation targeting” may allow prices to increase above its 2 percent target, to offset years of stagnant inflation, before raising rates.  The Fed has its set meeting this week, when more details about the policy shift are expected to emerge.

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