Inflation continues to weigh on consumers and the markets. The latest Consumer Price Index shows while inflation has slowed...prices are still rising for many key items. The monthly CPI rose 8.3% from a year earlier. It’s up a tenth of a percent from July, as lower gas prices were offset by higher costs for rent and food. But analysts were expecting a decrease.
Core inflation...which excludes energy and food prices, also increased 6.3% in August, compared to a year ago. Month over month It was up .6%. That’s double July’s pace, and a signal broad price pressures strengthened.
This will likely push the Federal Reserve to hike its benchmark rate another 75-basis points, following the central bank’s policy meeting next week. And it may even result in more aggressive increases after that. Mark Schultz of Northstar Commodity says, “The three-quarters of percent increase is solidified. Now it’s going to be a function of do they decide they want to continue to raise the rate hikes another half or three quarters of a percent and my guess is that is the chatter they’re going to put out.”
Food inflation was up .8% with the biggest price increases led by eggs....rising 2.9% for August. They’re up nearly 40%, over the past year. Cereals and bakery products rose 1.2%, followed by a .8% and a .5% rise in fruits and vegetables.
The market reaction was negative with the DOW plunging more than 1,200 points on the day and the dollar index up over 1600 points. That weighed on commodities like crude oil, corn, soybeans, cattle and cotton.
