US inflation pressures ease in August with Fed unlikely to postpone tapering

The US consumer price index (CPI) has climbed just 0.1 per cent month-on-month following predictions to stay flat at 0.2 per cent.

The year-on-year figure for August is 1.5 per cent, down from 1.6 per cent inflation in the year to July.

A breakdown of components, month-on-month:

  • Food: 0.1 per cent
  • Housing: 0.1 per cent
  • New vehicles were unchanged
  • Gasoline: -0.1 per cent
  • Energy: -0.3 per cent

Year-on-year for August, food was up 1.4 per cent and energy 3.2 per cent, whilst gasoline was down at -2.4 per cent.

The Bureau of Labor Statistics, who release the CPI results, says:

Major energy components are mixed over the last 12 months. Despite the recent declines, the index for natural gas has increased 4.8 percent over the past year, while the electricity index has increased 2.8 percent. However, the gasoline index has declined 2.4 percent over the span, while the index for fuel oil is unchanged.

Paul Dales, senior US economist for Capital Economics says on Fed tapering in light of the CPI results:

We don’t think the fall in US CPI inflation in August will prompt the Fed to postpone tapering until later in the year... as the danger of very low core inflation has passed. True, motor vehicle inflation could fall further as the weaker yen continues to reduce the cost of importing components from Japan. But the rebound in cotton prices has reduced the scope for further declines in clothing inflation and falling vacancy rates could further boost rents inflation.