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‘Huge’ rise in energy prices pushes headline inflation higher

by Patria

The U.S. Consumer Price Index (CPI) rose 3.7% year-over-year in August, according to the Department of Labor, with the increase largely due to a spike in gasoline prices, while the overall CPI data showed a decline in inflation.

The August CPI data is up from a 3.2% year-over-year increase in July.

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Core CPI prices, which exclude food and energy, rose 4.3%, down from 4.7% in July, but still more than double the Federal Reserve’s 2% target. While this is the largest monthly increase in inflation since January, it does not reflect the small increase in the core CPI.

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“The move higher in headline inflation is a head fake as it was mostly driven by a huge 10.5% jump in energy commodity prices,” Reuters quoted Brian Jacobsen, chief economist at Annex Wealth Management in Wisconsin, as saying on Wednesday.

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The August CPI data has analysts largely expecting the Fed to hold off on another interest rate hike at its meeting next week, as most economic forecasts are for a gradual decline in inflation for the rest of the year.

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