The Bureau of Labor Statistics reported Tuesday that inflation rose more than expected in August due to rising shelter and food costs.
The consumer price index increased for the month and the year. Excluding volatile food and energy costs, the consumer price index increased from July to August.
The economists were expecting headline inflation to fall and core inflation to increase. The forecasts were for 8% and 6% gains, respectively.
The gasoline index slid by 10.6% in the month. Declines were offset by increases in other places.
Shelter costs jumped 0.7% in August and are up 6.2% from a year ago as the food index increased.
Medical care services rose 0.8% on the month and 5.6% on the year. The prices of new and used vehicles both increased.
The markets fell after the news, with the futures tied to the DJIA down 350 points.
Mike Loewengart, head of model portfolio construction for Morgan Stanley's Global Investment Office, said that today'sCPI reading is a stark reminder of the long road we have until inflation is back down to earth Expectations that the Fed would lay off the gas may have been premature.
The two-year note, which is tied to the Federal Reserve's interest rate moves, jumped 0.13 percentage point.
Markets were expecting the Fed to raise its rate by 0.75 percentage points. The possibility of a half-point move completely off the table was taken off the table by traders.
Quincy said that they are looking for where inflation is coming from. It is clear to them that it is food, transportation and Rent. Rent continues to go up. That is the most stubborn part of the Fed's fight.
There was a report on the inflation picture.
The price of gasoline peaked at $5 a gallon this summer. The cost of living in other key areas such as food and shelter continues to push higher, raising concerns that inflation that had been concentrated is now beginning to spread.
bread prices rose 2% on the month and are up 16.2% from a year ago For the year, eggs are up 39.8%, and canned fruits are up 16.6%.
Airline fares continued their recent decline, off 4.6% on the month, but still 33.4% higher than a year ago.
There was some good news for workers in the August report, as real average hourly earnings rose slightly. They were still down from a year ago.
The Federal Reserve has raised interest rates four times this year in order to fight the cost of living. The September meeting was not expected to be affected by Tuesday's report, as the central bank looks to tame inflation without tanking the economy.
Inflation has played a major role in the economy's struggles after posting its best year since 1984 last year. According to the Atlanta Fed, gross domestic product contracted in each of the first two quarters, meeting a widely accepted definition of a recession, and is on track to rise at just a 1.3% annual rate in the third quarter.
Solid job gains through the year are what the Fed is hoping to slow. There is a huge gap between job openings and available workers as labor force participation is stuck below its pre-pandemic levels. Wages have risen and put pressure on prices.
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