Rising gas prices across the U.S. helped drive annual inflation up from 3.2% in July to 3.7% in August, but core inflation eased as long-running price increases showed signs of continued slowing, according to a Labor Department report released Wednesday.
August’s Consumer Price Index Summary found overall prices on consumer goods and services rose 0.6% from July to August, the biggest month-over-month increase in more than a year. Core inflation, a measure that strips out volatile food and energy prices, rose .3% over last month but the year-over-year rate of 4.3% for August was down from July’s 4.7%.
The report found gasoline price hikes were the primary driver of the rate jump from July to August.
The average price of a gallon of regular across the country was $3.85 on Wednesday and has risen about 5 cents per gallon in the last week, according to AAA data. This time last year, gas was selling for an average of $3.71 per gallon. Utah gas prices have been running well north of the national average and on Wednesday, a gallon of regular was going for $4.31 across the state. Utah gas prices have risen about 20 cents per gallon over the last month.
Like gasoline prices, regional inflation for Utah and its fellow Mountain West states has been on an extended run of outpacing the inflation rate for the rest of the country. But the Labor Department’s August data shows inflation for the Mountain West came in a tick below the national average at 3.6% in August.
New wage data from the Labor Department, also released on Wednesday, showed inflation’s impact on consumers’ ability to stretch a dollar as real average hourly earnings for all U.S. employees decreased 0.5% from July to August.
The downtick in core inflation, a metric favored by the Federal Reserve, is widely expected to help compel the monetary body to take a pause on interest rate hikes when it meets to consider changes next week.
Headline inflation had been on a steady downward trajectory after peaking at 9.1% in June 2022 and marching to 3.0% in June before showing upticks in July and August. But, easing in core prices is likely to figure more largely in the Fed’s discussions at its September meeting as well the new earnings data.
“We’re getting to the stage where we’ve basically had all the low hanging fruit in terms of disinflation,” Blerina Uruci, an economist at T. Rowe Price, told The Associated Press. “The progress on core inflation over the coming months is going to be slow and it’s going to be uneven.”
Even after an early July report found U.S. inflation in June had dropped to 3%, the lowest annual rate in more than two years, the Federal Reserve announced a .25% hike to its benchmark lending later in the month, its 11th rate increase since March 2022.
Following a decision at its June meeting to take a pause on a streak of rate hikes, the Fed’s Open Markets Committee voted unanimously to support the increase, which brought the monetary body’s intra-bank overnight lending rate into the range of 5.25% to 5.5%, the highest it’s been since 2001.
While economists widely expect the Fed to skip making a rate hike at its September meeting, Federal Reserve Chairman Jerome Powell signaled at an annual conference of central bankers held last month that the monetary body may not be done hiking its benchmark lending rate on its continued mission to bring inflation down to the monetary body’s target of 2% annual inflation.
“We have tightened policy significantly over the past year,” Powell said. “Although inflation has moved down from its peak, a welcome development, it remains too high.
“We’re prepared to raise rates further if appropriate and intend to hold policy at a restrictive level until we are confident that inflation is moving sustainably down toward our objective.”