U.S. consumer prices increased more than expected in August as rising rents and healthcare costs offset a drop in gasoline prices, pointing to a steady build-up of inflation that could allow the Federal Reserve to raise interest rates this year. Consumer Price Index rose 0.2 percent last month after being unchanged in July. In the 12 months through August, the CPI increased 1.1 percent after advancing 0.8 percent in July. Core CPI, which strips out food and energy costs, rose 0.3 percent last month, the biggest increase since February.
Last month's uptick in inflation is likely to be welcomed by Fed officials when they meet next Tuesday and Wednesday to deliberate on monetary policy. However against the backdrop of disappointing economic data for August, including weak retail sales and industrial production and a slowdown in job growth, Janet Yellen is expected to leave interest rates unchanged at their next meeting.
The University of Michigan’s index of consumer sentiment was unchanged at 89.8. Among all households, 42 percent reported an improvement in their financial situation this month, down from 49 percent three months ago. Consumers ideas of current economic conditions fell to an almost one-year low, while households’ plans to purchase automobiles and other big-ticket items became more dependent on low interest rates. Retail sales fell in August for the first time in five months, hinting at a smaller rebound in the economy this quarter.