U.S. core CPI tops forecasts, bolstering case for rate hike

Skip to Content News Archives Economy Energy Oil & Gas Renewables Electric Vehicles Mining Commodities Agriculture Real Estate Mortgages Mortgage Rates Finance Banking Insurance Fintech Cryptocurrency Work Wealth Smart Money Wealth Management Investor Personal Finance Family Finance Retirement Taxes High Net Worth FP Comment Executive Women Puzzmo Newsletters Financial Times Business Essentials More Innovation Information Technology FP500 Podcasts Small Business Lives Told Tails Told Shopping Financial Post Store Obituaries Place a Notice Advertising Advertising With Us Advertising Solutions Postmedia Ad Manager Sponsorship Requests Classifieds Place a Classifieds ad Working Profile Settings My Subscriptions My Offers Newsletters Customer Service FAQ News Economy Energy Mining Real Estate Finance Work Wealth Investor FP Comment Executive Women Puzzmo Newsletters Financial Times Business Essentials This advertisement has not loaded yet, but your article continues below.HomeNewsEconomyU.S. core CPI tops forecasts, bolstering case for rate hikeMany Americans have been squeezed between rising prices and tepid pay gainsAuthor of the article:Last updated 5 minutes ago Goods prices, excluding food and energy commodities, edged up 0.1 per cent, led by increases in prices for new and used vehicles. Photo by Scott Olson/Getty ImagesA key gauge of United States consumer prices rose by more than expected last month, bolstering the case for Federal Reserve officials to raise interest rates next week.THIS CONTENT IS RESERVED FOR SUBSCRIBERS ONLYSubscribe now to read the latest news in your city and across Canada.Exclusive articles from Barbara Shecter, Joe O'Connor, Gabriel Friedman, and others.Daily content from Financial Times, the world's leading global business publication.Unlimited online access to read articles from Financial Post, National Post and 15 news sites across Canada with one account.National Post ePaper, an electronic replica of the print edition to view on any device, share and comment on.Daily puzzles, including the New York Times Crossword.SUBSCRIBE TO UNLOCK MORE ARTICLESSubscribe now to read the latest news in your city and across Canada.Exclusive articles from Barbara Shecter, Joe O'Connor, Gabriel Friedman and others.Daily content from Financial Times, the world's leading global business publication.Unlimited online access to read articles from Financial Post, National Post and 15 news sites across Canada with one account.National Post ePaper, an electronic replica of the print edition to view on any device, share and comment on.Daily puzzles, including the New York Times Crossword.REGISTER / SIGN IN TO UNLOCK MORE ARTICLESCreate an account or sign in to continue with your reading experience.Access articles from across Canada with one account.Share your thoughts and join the conversation in the comments.Enjoy additional articles per month.Get email updates from your favourite authors.THIS ARTICLE IS FREE TO READ REGISTER TO UNLOCK.Create an account or sign in to continue with your reading experience.Access articles from across Canada with one accountShare your thoughts and join the conversation in the commentsEnjoy additional articles per monthGet email updates from your favourite authorsSign In or Create an AccountThe consumer price index, excluding food and energy, climbed 0.3 per cent in August from a month earlier, according to Bureau of Labor Statistics data out Friday. The median estimate in a Bloomberg survey called for a 0.2 per cent increase. On an annual basis, it advanced 2.4 per cent.Futures showed investors priced in a rate hike next week as a near certainty following the release, and put a high likelihood on a second increase before the end of the year.SUBSCRIBER EXCLUSIVE: FP West: Energy Insider brings you behind the oilpatch’s closed doors with exclusive insights from insiders every Wednesday morning.By signing up you consent to receive the above newsletter from Postmedia Network Inc.A welcome email is on its way. If you don't see it, please check your junk folder.The next issue of FP West: Energy Insider will soon be in your inbox.We encountered an issue signing you up. Please try againThe report suggests inflation made little progress toward the Fed’s goal last month amid ongoing pressures from the Iran war, tariffs and the data centre buildout. The U.S. central bank will likely see the numbers as tipping the scale in favour of the first rate increase in three years after some officials suggested the Sept. 15-16 decision could come down to what the figures showed.“The renewed march higher in oil, gasoline and diesel prices add to concerns that higher energy prices could spill over to other goods and services and inflation expectations,” nationwide chief economist Kathy Bostjancic said in a note. “As such we are now looking for the Fed to raise rates” next week, she said.Fed Chairman Kevin Warsh has been reluctant to tip his hand on the central bank’s next move, but in a speech last month he said the Fed would “have work to do” if it could not “be confident that underlying inflation is moving to our objective, clearly and at sufficient speed.”The U.S. economy, meanwhile, is contending with resurgent energy prices as the Middle East and Russia-Ukraine wars hit supplies. This week, oil prices pushed above US$100 a barrel and U.S. retail diesel prices rose to a record.Friday’s report showed the overall CPI was up 0.4 per cent from the prior month and 3.4 per cent from a year earlier. Energy prices rose 2.1 per cent in August, while grocery prices were little changed and owners’ equivalent rent, the largest component of the CPI, advanced 0.2 per cent.Record IncreasesServices prices excluding energy and rents rose 0.5 per cent, boosted by a record increase in wireless telephone services, according to data compiled by Bloomberg. Hotel and motel rates and airline fares also posted strong advances.Goods prices, excluding food and energy commodities, edged up 0.1 per cent, led by increases in prices for new and used vehicles.The report also contained signs of ongoing pressures from the data centre buildout: Computer software and accessories prices rose a record 25.4 per cent from a year earlier, while prices of computers, peripherals and smart home assistants advanced a near-record 8.4 per cent.This advertisement has not loaded yet.This advertisement has not loaded yet, but your article continues below.“It’s not really a report that makes us get more concerned about the inflation outlook,” even if it will lead the Fed to raise rates next week, said Stephen Juneau, a senior economist at Bank of America Corp. An increase like the one seen in the wireless services category “tends to be noisy and reverse,” he said.What Bloomberg Economics Says…“August’s CPI report likely won’t be able to reassure the doves on the FOMC to keep rates on hold. Together with the hawkish market reaction, the Fed likely will have to hike at its September meeting.”— Anna Wong and Troy DurieMany Americans have been squeezed between rising prices and tepid pay gains. A separate report Friday that combines the inflation figures with recent wage data showed real average hourly earnings fell 0.3 per cent in August from a year earlier, adding to a string of weak readings since the Iran war began.Central banks typically raise interest rates to increase borrowing costs, dampen demand and cool inflation. Fed officials have left rates steady at each of their last five meetings, though at the July gathering, three of them dissented in favour of a quarter-point rate hike.The August CPI report is the last major gauge of inflation before the September gathering. A separate report Thursday showed producer prices rose last month by the most since May, lifted by a surge in energy prices.The Fed’s preferred measure of inflation, the personal consumption expenditures price index, is due at the end of the month. Following Friday’s release, economists at several firms said they expect the core gauge in the PCE report to show a 0.3 per cent increase.—With assistance from Mark Niquette, Michael MacKenzie, Julia Fanzeres and Michael Sasso.We apologize, but this video has failed to load.Notice for the Postmedia NetworkThis website uses cookies to personalize your content (including ads), and allows us to analyze our traffic. Read more about cookies here. By continuing to use our site, you agree to our Terms of Use and Privacy Policy.