August Inflation Likely Rose Due to Energy Prices, CPI Report Reveals

Economists are predicting that the latest government report on prices, set to be released today, will reveal a rise in inflation for August, driven primarily by increasing energy costs.

As of last week, the average price of a gallon of regular unleaded gasoline stood at $3.82, representing an increase of approximately $1.50 compared to pre-pandemic levels. Gas prices continue to climb, exerting upward pressure on overall inflation.

Despite the expected uptick in the inflation rate, it is unlikely to prompt the Federal Reserve to implement another interest-rate hike during its upcoming meeting later this month. However, economists suggest that there may be another rate increase before the year concludes.

Forecasts indicate that the U.S. government’s consumer price index (CPI) will reveal a year-over-year inflation rise ranging from 3.6% to 3.7% for August, surpassing the 3.2% rate recorded in July. While this anticipated increase may not immediately trigger an adjustment in the Federal Reserve’s key rate, which has already seen several hikes leading to the highest federal funds rate in 22 years, it could set the stage for further rate hikes in the coming months if inflation remains above the Fed’s 2% target.

Greg McBride, chief financial analyst with Bankrate, emphasized the continued relevance of inflation readings in shaping the Fed’s future actions. “The Federal Reserve is very likely to leave rates unchanged at their meeting later this month, but inflation readings are still highly relevant to what the Fed does – or does not – do in the months ahead,” he noted.

The release of the Consumer Price Index (CPI) remains a significant economic event, as it provides the Federal Reserve with critical guidance to assess whether prices are “stable” and helps shape monetary policy decisions.

Georgia’s recent declaration of a state of emergency, temporarily suspending the state’s excise tax on motor and locomotive fuel to alleviate the burden of high gas prices on residents, underscores the continued political and economic impact of inflation. In response to the move, Georgia Governor Brian Kemp remarked, “From runaway federal spending to policies that hamstring domestic energy production, all Bidenomics has done is take more money out of the pockets of the middle class.”

The Consumer Price Index (CPI) will be officially released by the Department of Labor at 8:30 AM ET on Wednesday, shedding light on the state of inflation in the United States.

The CPI, according to the Bureau of Labor Services, examines the average change in prices for specific products and services over a defined period.

In the previous month, the government reported a 3.2% increase in prices in July compared to the previous year, primarily due to a technicality in the calculation of annual price gains, which marked the end of a year-long period of declining consumer price inflation.

The August inflation rate is anticipated to fall between 3.6% and 3.7%, an increase from the 3.2% recorded in July, as per current forecasts.