Consumer inflation slowed sharply last month as energy prices moderated, brightening prospects for future economic growth.
The Associated Press reported that the Labor Department reported Friday (Sept. 15) that its closely watched Consumer Price Index posted a 0.2% increase in August, just half of the 0.4% rise seen in July.
The improvement reflected a big slowdown in energy costs, which edged up by just 0.3 percent in August after having surged by 2.9% in July.
Outside of the volatile energy and food sectors, core inflation posted a moderate 0.2% rise in August.
Both the overall rise in inflation and the increase in core inflation were in line with analysts’ expectations, providing support to their view that a slowing economy is beginning to dampen inflation pressures.
Federal Reserve policymakers meet next Wednesday and the central bank is widely expected to leave rates unchanged. The Fed passed up a chance to raise rates at its last meeting in August, breaking a string of 17 consecutive rate hikes.
However, the central bank has let it be known that if inflation pressures do not moderate, it is ready to raise rates further.
The new figures showed that core inflation over the past 12 months has risen by 2.8%, the biggest 12-month gain in nearly five years and far above the Fed’s comfort zone of 1% to 2% price gains in core inflation.
Still, optimists point to big declines in world energy prices in recent weeks as evidence that inflation pressures are beginning to moderate.