CPI remains below Fed’s inflation target
Sept. 18, 2013 – Overall consumer prices increased an annualized 0.1 percent in August, a modest increase that could provide the Federal Reserve some latitude on monetary policy, NAFCU Chief Economist and Director of Research David Carrier said Tuesday.
On a year-to-year basis, CPI and core CPI are up 1.5 percent and 1.8 percent, respectively. “Both figures remain below the Fed’s inflation target and will be an important metric as they discuss tapering quantitative easing,” Carrier said in a NAFCU Macro Data Flash report.
Carrier said August’s thin increase in CPI was due largely to a decline in energy prices. For the 12-month period, overall consumer price index growth was 1.5 percent, down from 2 percent in July. Core prices – excluding food and energy costs – changed little, rising only 0.1 percent in August month over month, which followed a 0.2 percent increase in July. Year-over-year Core CPI grew 1.8 percent, compared to July’s pace of a 1.7 percent increase.
Energy prices decreased by 0.3 percent in August, following a 0.2 percent increase in July. Energy prices are down 0.1 percent from a year ago. Food prices increased 0.1 percent in August following an increase of 0.2 percent in July; they were up 1.4 percent on a year-over-year basis.
The Federal Open Market Committee wraps up its two-day session today to determine whether any changes are needed in the Fed’s monetary policy. The fact that inflation increased at a slower pace in August on a month-to-month basis than in July, according to data published by the Bureau of Labor Statistics, gives the Fed some latitude to continue with asset purchases, Carrier said. However, most Fed watchers expect the FOMC to announce very modest tapering at the conclusion of tomorrow’s meeting.
NAFCU will publish a Macro Data Flash on the committee’s policy statement and what it means to credit unions after the meeting.
NAFCU Macro Data Flash report