The consumer price index fell 0.1% in August after an increase of 0.1% the previous month, the Labor Department said Wednesday.
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Signs of a disinflationary trend reasserting itself are in stark contrast with a rapidly tightening labour market and highlight the dilemma Fed faces as its contemplates raising interest rates for the first time in nearly a decade.
“With food prices holding steady and transportation prices dipping slightly, consumers are in a good spot”, said Scott Anderson, Zions Bank President and CEO. “This is a tough call for the Fed“.
This is alongside the expectations of the economists for a mild drop in yearly inflation from a 0.1 per cent.
A 0.2 percent increase by the index for shelter contributed to the core price growth along with higher prices for apparel, tobacco, and alcoholic beverages.
“Together with the fact that the economy is already very close to full employment, this suggests that both wages and core inflation will surprise on the upside next year“.
Food prices were up 0.2 per cent last month, led by another surge in egg prices.
Stripping out food and energy, which can be volatile, core CPI rose 0.1 per cent in August, the same as in July. Over the last 12 months, the core reading is up by 1.8% – following a similar yearly increase in July.
Weak inflation below the Fed’s annual 2% target has provided the central bank little urgency to act, but Fed officials have said that’s partly because of the transitory effects of low oil and gas prices.
Dr Esmond Birnie, PwC’s chief economist in Northern Ireland, said: “It’s exactly seven years today since the global financial storm broke with the collapse of Lehman Brothers and there remains considerable turbulence remains in the global economy that is impacting interest rates and fiscal policy in the UK”. The increase in pay has always been the missing piece in Britain’s economic recovery and may pressure the Bank of England to raise interest rates despite low inflation.
This means prices as measured by all-items Consumer Price Index (CPI) decreased by an average of -2,77% between August 2014 and August 2015, statistical agency Zimstat said on Wednesday.
“Headline inflation will most probably stay around 0 per cent for the rest of the year but one cannot rule out that inflation could turn negative again”. After rising for a few months, they have been headed lower again.
Inflation in the United Kingdom fell to zero in August, due to cheaper fuel prices, clothing prices which rose less than they did a year ago, and stiff supermarket competition.
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The index for the primary articles group, which has a weight of 20.12 per cent in the WPI, rose 1.7 per cent during August 2015.
