August CPI report was out yesterday. Overall CPI MoM rose 0.6% vs. 0.2% in July while the core CPI MoM rose 0.3% in August vs. 0.2% in July. Overall CPI YoY rose 3.7% in August vs. 3.2% in July, 3% in June, 4.0% in May, 4.9% in April and 5% in March. Core CPI YoY rose 4.2% in August vs. 4.7% in July, 4.8% in June, 5.3% in May, 5.5% in April and 5.6% in March. The index for gasoline was the largest contributor to the monthly all items increase, accounting for over half of the increase. Also contributing to the August monthly increase was continued advancement in the shelter index, which rose for the 40th consecutive month. The energy index rose 5.6 percent in August as all the major energy component indexes increased.
WOW! The gasoline price went up a lot in August. It isprojectedthat the Brent crude oil price will increase from average $86 per barrel in August to $93/b in 4Q23. So the upward pressure for gasoline prices is likely to continue. This could have some second order effect to drive prices up in other areas like transportation services, food, etc. The core CPI on the YoY basis continues to drop, which is a good sign. But it’s unclear if the inflation fight is really over if the gasoline prices go haywire. The current expectation is that the Fed will keep rate unchanged next week but it’s hard to say if they will raise another 25 bps in the November FOMC meeting.