U.S. consumer prices grew at a slower pace in August as gains cooled off from their fastest rate in 13 years.
The Labor Department said Tuesday that the consumer price index rose 5.3% year over year last month, matching economists’ expectations. Prices rose at a 5.4% annual pace in July, matching the prior month’s gain as the fastest since August 2008.
Prices increased 0.3% month over month, slower than the 0.4% gain that was anticipated.
Energy prices rose 2% last month, mostly due to a 2.8% increase in the gasoline index. Food prices were up 0.4%.
Prices for household operations and shelter, new vehicles, recreation, and medical care all rose in August. Airline tickets, used cars and trucks, and motor vehicle insurance all saw prices decline.
Core prices, which exclude food and energy, edged up 0.1% in August and 4% annually. Economists were expecting respective increases of 0.3% and 4.2%.
"Smaller than expected increases in headline, and especially core, inflation for the month of August were underscored by easing price pressures in some of the areas where we saw the biggest increases a few months ago," said Greg McBride, chief financial analyst at Bankrate. "Airfare, lodging, used car and truck prices, and even motor vehicle insurance all declined in August, supporting the idea of inflation being ‘transitory.’"
The Federal Reserve has held firm in its belief that inflation is "transitory" and that price pressures will ease as supply-chain disruptions caused by COVID-19 are resolved.
Fed Chairman Jerome Powell said during his Jackson Hole symposium speech last month that the economy has met the test of "substantial further progress" on inflation, signaling the central bank could soon begin to taper its asset purchases. However, he noted that rate hikes were further out on the horizon.
"The debate over whether inflation will be short-lived or more sustained has not been resolved," McBride said. "The jury will remain out for many more months, particularly with persistent supply chain constraints."