The August CPI report came in yesterday morning below consensus at 0.3% versus the expected 0.4% month-over-month. Year-over-year, CPI remains elevated at 5.3%, but is now decreasing from last month’s print of 5.4%. Core CPI, which excludes volatile items such as food and energy, came in at 0.1% versus the expected 0.3%. Breaking down the components, transportation services were down as the delta variant led to hesitant travelers and decreasing airline fares. Used cars have been a big inflation talking point recently, but they may be peaking as price increases turned negative after five consecutive months of gains. Even though this report shows signs of slowing compared the last one, bottlenecks in supply chains will likely continue to keep inflation elevated for the next few months. The Federal Open Market Committee remains focused on the labor market and likely will not change its course. It probably will start tapering near the end of the year as inflation slowly dissipates.
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