The Consumer Price Index (CPI) slowed slightly to 8.3 percent year-over-year in August, vs. 8.5 percent in July. In month-over-month terms, this topline inflation metric rose 0.1 percent—up from zero percent the month prior. While a decline in energy prices was a major factor in this month’s reading, inflation in other parts of the economy intensified. Indeed, in month-over-month terms core inflation rose to 0.6 percent, vs. 0.3 percent in July; and in year-over-year terms it rose to 6.4 percent, vs. 6.0 percent in July. While these readings support our view that inflationary pressures may have peaked in Q2 much work remains to be done. With the next Fed meeting a little over a week away, we continue to expect another 75-basis point hike awaits—especially in light of the exceptionally tight labor market. Ultimately, we expect the US economy to tip into recession before the end of 2022. Headline CPI eased somewhat in August, but remained near the 40-year high. On a year-on-year basis, headline inflation fell to 8.3 percent from 8.5 percent the month prior. The gauge also rose 0.1 percent in month-over-month terms, following a flat reading in July. Gasoline prices fell 10.6 percent from the prior month, but gains in many other categories offset the decline. Indeed, for the month of August food prices rose by 0.8 percent. Core CPI intensified in August. The core index, which is total CPI less volatile food and energy prices, rose by 0.6 percent month-over-month in August, vs. 0.3 in July, 0.7 in June, and 0.6 percent in May. Indeed, shelter prices rose 0.7 percent, and medical care rose 0.8 percent. Additionally, in year-over-year terms core CPI was rose to 6.4 percent from 6.0 percent in July.CPI Reaction—Core inflation offsets any improvement in energy prices in August
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