Inflation likely slowed in August for the second consecutive month. Still, consumer prices are expected to remain painfully high, keeping the pressure on the Federal Reserve to go big at its policy-setting meeting next week.
The Labor Department is releasing the highly anticipated consumer price index report on Tuesday morning, providing a fresh look at how hot inflation ran in August.
Economists expect the gauge, which measures a basket of goods, including gasoline, health care, groceries and rent, to show that prices surged 8.0% in August from the previous year — down from the 8.5% reading in July and a marked decline from the 40-year high of 9.1% notched in June.
On a monthly basis, inflation is projected to have decreased by 0.1%. Still, the report is expected to show underlying momentum in inflation: core prices, which exclude the more volatile measurements of food and energy, are expected to climb 6.0% annually, snapping a four-month streak of slowing growth and marking the fastest pace since April.
On a monthly basis, prices likely climbed 0.3%, driven by prices in areas like housing and rent. Fueling the price spikes are several issues related to the COVID-19 pandemic and the rousing economic rebound from the worst downturn in nearly a century.
In the wake of lockdown orders that saw a broad swath of the country shuttered, the economy staged a stunning comeback, powered by unprecedented government spending, emergency steps by the Fed, and the widespread distribution of vaccines.
As Americans — flush with stimulus cash — ventured out to shop, eat and travel, businesses struggled to meet the demand, reporting difficulties in onboarding new employees and buying enough supplies to satisfy the need.
To attract new talent, many businesses hiked wages — but to offset those increases, employers have reported raising the prices of their products. The matter was complicated by bottlenecks at ports and freight yards and a lack of shipping containers, snarling the global supply chain.
Since early spring, however, the Russian war in Ukraine has further exacerbated the inflation crisis by elevating food and energy prices.
Oil and gasoline prices have declined sharply over the summer, although economists have cautioned the situation remains uncertain due to the ongoing conflict in Europe.