String of U.S. CPI 'Disappointments' Ended in August
Core CPI prices were in line with forecasts, rising 0.2% in August, and the year-over-year core CPI inflation rate was unchanged at 1.7% in the month. The Fed looks to ‘core’ inflation as a measure of underlying price increases and a core CPI inflation rate of around 2¼% is consistent over time with a 2% core PCE price inflation rate. At the turn of the year, CPI inflation was running at that rate (January 2.3% and February 2.2%), but the rate then unexpectedly dipped to 1.7% by May—a decline that Fed Chair Yellen attributed to idiosyncratic factors such as cellphone plans. The August report provides support to Yellen's view.
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