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US prices rose again in August, although the overall rate of inflation slowed for a second straight month as energy costs fell.
The Consumer Price Index (CPI), the Bureau of Labor Statistics’ monthly survey of the cost of living, found that prices were 8.3 percent higher last month than in August of last year. The figure is down from the annual rate of 8.5% registered in July and 9.1% in Junethe highest rate in four decades.
But despite the headline drop, the details of the report showed a rise in prices across a wide range of goods and services and led to a sharp sell-off on Wall Street.
Falling gas prices were the main contributor to the overall decline. Gas prices have fallen for 13 straight weeks. Nationally, a gallon of gas currently costs an average of $3.71, according to AAA, down from more than $5 in June.
Used and new car prices – once a major driver of inflation – have fallen, as have airline ticket prices.
But the prices of other goods and services continue to rise.
Overall, prices rose slightly during the month, up 0.1% from July. And after stripping out energy and food costs, prices rose 6.3% over the past 12 months, up from 6.1% in July. The increases were wide-ranging, with prices for shelter, food and medical care rising the fastest.
The food index rose 11.4% over the past year, the biggest 12-month increase since the period ending in May 1979.
Although the core rate of inflation has slowed, it still leaves inflation at a pace not seen in four decades and adds to the headwinds facing the Biden administration as the midterm elections approach.
The news comes as the Federal Reserve is mulling another sharp hike in interest rates as it struggles to contain rising prices. Anticipating further growth, investors sold off shares after the news broke with the Dow Jones falling more than 800 points (2.7%).
Many parts of the US economy remain strong, mostly labor market and household spending. Fed Chairman Jerome Powell warned last month that the central bank would use its tools “forcefully” to lower prices and said there would be forward painsignal that he expects Fed policy to slow job and spending growth.
The Federal Reserve is raising interest rates at a pace not seen since the 1980s. It raised its benchmark interest rate by 75 basis points in July, the second such hike in two months, and is expected to announce a similarly sharp rate hike when it meets again next week.
Last week, Powell made it clear that taming inflation remains the Fed’s top priority. “History strongly cautions against premature policy loosening,” Powell said during a panel discussion at the Cato Institute, a libertarian think tank. “I can assure you that my colleagues and I are very committed to this project and will continue to execute it until the work is completed.”