U.S Consumer Prices Drop On Energy Price Price Rout

Prices paid by American households declined in August as cheaper gasoline helped keep inflation below the objective of Federal Reserve policy makers.

The consumer-price index fell 0.1 percent, the first decrease since January, after a 0.1 percent gain in July, Labor Department figures showed Wednesday. The so-called core measure, which strips out often-volatile fuel and food costs, rose 0.1 percent for a second month. Goods prices declined, while services barely rose.

A 15 percent plunge in energy costs over the past 12 months and a rising dollar are acting as a brake on inflation that the Fed views as temporary. Central bankers, who conclude a two-day meeting on Thursday, will have to weigh restrained prices, uneasy financial markets and a resilient U.S. labor market as they consider raising interest rates.

“Inflation is still relatively muted,” said Gregory Daco, head of U.S. macroeconomics at Oxford Economics USA in New York, who correctly projected the drop in the CPI. “We continue to see pass-through from a strong dollar and low energy costs.”

The drop in the the CPI matched the Bloomberg survey median. Estimates ranged from a decline of 0.2 percent to a gain of 0.3 percent.


Dean Popplewell

Dean Popplewell

Vice-President of Market Analysis at MarketPulse
Dean Popplewell has nearly two decades of experience trading currencies and fixed income instruments. He has a deep understanding of market fundamentals and the impact of global events on capital markets. He is respected among professional traders for his skilled analysis and career history as global head of trading for firms such as Scotia Capital and BMO Nesbitt Burns. Since joining OANDA in 2006, Dean has played an instrumental role in driving awareness of the forex market as an emerging asset class for retail investors, as well as providing expert counsel to a number of internal teams on how to best serve clients and industry stakeholders.
Dean Popplewell