Consumer Price Inflation Slows in August

Prices for consumers dipped slightly in August signaling a possible moderation in inflation, according to data released Wednesday by the U.S. Labor Department.

For August, overall consumer prices fell 0.1 percent from July. The drop was primarily attributed to lower energy prices in the month. The Federal Reserve’s preferred measure, the core consumer price index — which excludes food and energy prices — rose 0.2 percent in the month.

Although the Fed’s price index increased, economists saw the numbers as a good sign, as most analysts expected a slight increase in core prices. “This validates the Fed’s interest rate move yesterday,” said Dan North, chief economist with Euler Hermes ACI. “The numbers were in line with what the Fed was hoping to see.”

The Fed has been balancing its charge to keep inflationary pressures at bay while guiding monetary policy in an economic environment many feel is heading toward a slowdown. That balancing act culminated in the Fed cutting its benchmark interest rate yesterday by 50 basis points.

“The Fed is betting that a slowing economy will quell inflationary measures,” said North.

With August’s numbers factored in, core consumer prices have risen 2.1 percent in the past 12 months, slightly above the Fed’s “comfort zone” of 2 percent, but the lowest level in 17 months.

Economists caution that overall consumer prices will not be pretty in the coming months, as the energy prices that spiked over the past few weeks were not factored into the August numbers.