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Consumer prices — a key inflation gauge — hotter than expected in August


A key inflation indicator showed higher-than-expected increases in core prices in August, adding more pressure on the Federal Reserve to act despite the danger of a deeper recession.

Consumer prices increased by 6.2% in August in comparison with the identical month one 12 months ago, in accordance with the Commerce Department’s Personal Consumption Expenditures index — the Fed’s preferred measure of inflation. The annual rate was down from 6.4% in July.

Prices rose by 0.3% in comparison with the previous month.

The core PCE, which excludes volatile food and energy prices, increased by a hotter-than-expected 4.9% year-over-year in August, or by 0.6% in comparison with July.

Ahead of the discharge, economists expected core PCE inflation to extend by 4.7% year-over-year and by 0.5% in comparison with July.

The PCE inflation gauge is one in every of many data points the Federal Reserve uses to tell its policy path. Earlier this month, the Fed hiked its benchmark rate of interest by three-quarters of a percentage point for the third consecutive time because it doubled down on the fight against inflation.

The Fed’s hawkish stance has spooked investors who fear the central bank’s rate hikes will tip the US economy right into a deep recession. Meanwhile, the Fed has pledged to regulate its path based on the info it receives.

“The [Federal Open Markets Committee] is strongly resolved to bring inflation all the way down to 2% and we’ll keep at it until the job is finished,” Fed Chair Jerome Powell said at a press conference earlier this month.

Ex-Treasury Secretary Larry Summers warned this week that the extent of world market risk is comparable to conditions seen prior to the Great Recession – and pointed to inflation-related discomfort as a key obstacle for policymakers.

The Fed is predicted to enact more rate hikes this 12 months.AFP via Getty Images

Chicago Fed President Charles Evans, a non-voting member of the rate-setting FOMC, said he was “a little bit nervous” the Fed was climbing rates too rapidly to totally assess the impact on markets.

One other closely watched gauge, the Consumer Price Index, showed earlier this month that inflation ran at a hotter-than-expected 8.3% in August. Core CPI inflation, which excludes volatile food and gas prices, rose 6.3% year-over-year — up sharply from the speed of 5.9% seen in June and July.

Gas stationMarket analysts are increasingly frightened of a world recession.Getty Images

As The Post reported, inflation has increased 13% since President Biden took office. Critics of the Biden administration argue the president’s government spending programs and restrictive energy policies have helped to fuel inflation.

Meanwhile, Biden and his allies have argued inflation is showing signs of improvement – and largely placed the blame for higher prices on aftershocks related to the COVID-19 pandemic in addition to Russian President Vladimir Putin’s invasion of Ukraine.

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