Consumers in US hit as inflation returns raising fuel, food & rental prices
- September 14, 2023
- Updated: 12:09 am
Washington, Sep 13 : Inflation returned with a vengeance after a comparative period of calm hitting consumers across the country as food, fuel and rental prices shot up.
Consumer prices in the US rose by more than expected last month, driven by higher costs for rent and fuel, particularly, media reports said.
The inflation rate, index of the pace of price rises, was 3.7 per cent over the 12 months to August, the Labor Department said adding up from 3.2 per cent in July.
The figures challenge officials trying to stabilise prices, which soared last year at the fastest pace in decades, making it the worst in 40 years.
The federal bank, it may be recalled, came up with a series of rate changes to curb inflation.
The inflation rate has dropped significantly from its peak last year.
It was around 11 per cent last year at its 40 year peak.
CPI rose to 9 per cent and WPI rose to 13 per cent last year, making it the highest peaks ever.
Economic analysts said the US central bank, which reins in inflation at 2 per cent, is likely to remain worried that the problem has not yet been resolved fully.
The bank has already raised its benchmark interest rate to the highest level in 22 years, targeting a range of 5.25 per cent to 5.5 per cent, in an effort to contain price rises, reports said.
The central bank is due to meet later this month to consider whether further rate increases will be necessary to combat the rising inflation.
Wednesday's labour ministry report showed fuel prices as the main driver of the inflationary pressures on consumer prices from July to August.
Monthly inflation was 0.6 per cent, the highest since June 2022.
Stripping out food and fuel, where price swings are common, prices still rose by 0.3 per cent, more than expected.
Housing costs, expected to cool this year and make up a major part of the US consumer price index, also rose for the 40th month in a row.
Economists said the Federal Reserve was still unlikely to raise interest rates at its meeting, especially since rate rises have little influence over fuel prices, which were the biggest contributor to the rise in inflation in August.
But Wednesday's data could prompt the federal reserve to act later in the year, said Charles Hepworth, investment director at GAM Investments, an asset management group based in Zurich.
The latest figures are "unlikely to encourage the Federal Reserve that the necessary cooling in the economy that they are looking for is being achieved as quickly as they want", he said.
"Energy prices are beyond their control. Despite this we should expect that a November hike is likely still in play."
Higher interest rates help cool the economy encouraging savings making it harder for households and businesses to go for loans to buy homes, expand operations and or spend on other items.
In theory, price increases should ease as the economy slows down. Despite its efforts, Federal Reserve chairman Jerome Powell warned last month that inflation remained "too high".
"We are prepared to raise rates further if appropriate, and intend to hold policy at a restrictive level until we are confident that inflation is moving sustainably down toward our objective," he said.
/IANS