Inflation in the USA was in line with expectations in August

According to US Department of Labor data, CPI increased by 0.4 percent in August compared to the previous month, seasonally adjusted. Market expectation was that inflation would increase by 0.4 percent on a monthly basis.

CPI increased by 0.1 percent on a monthly basis in July.

Annual inflation was 3.4 percent in August. Thus, annual CPI maintained its level of 3.4 percent in July. Market expectation was that annual inflation would be 3.4 percent.

CORE INFLATION EXCEEDED EXPECTATIONS ON A MONTHLY BASIS

Core CPI, which excludes food and energy prices, increased by 0.3 percent on a monthly basis in August. Market expectation was that core inflation would increase by 0.2 percent monthly.

Core CPI increased by 2.4 percent on an annual basis. Thus, annual core inflation decreased from 2.5 percent in July to 2.4 percent.

This outlook indicated that while headline inflation was in line with expectations, core inflation was stronger than expected on a monthly basis.

GASOLINE PRICES PUSHED INFLATION UP

The increase in energy prices in August was decisive on inflation.

While the energy index increased by 2.1 percent on a monthly basis, gasoline prices increased by 3.9 percent. The increase in gasoline prices accounted for more than one-third of the increase in total monthly inflation.

Energy prices have increased by 16.3 percent in the last 12 months. During this period, the increase in gasoline prices reached 27.4 percent.

The housing index also increased by 0.3 percent in August. Food prices increased by 0.1 percent on a monthly basis.

EYES ON FED'S INTEREST RATE DECISION

Inflation data in the USA is of critical importance for the markets as it is the last CPI data announced before the Fed's interest rate decision next week.

Although the headline inflation was in line with expectations, the core CPI increased by 0.3 percent on a monthly basis, above expectations, indicating that price pressures have not completely disappeared.

On the other hand, the decline in annual core inflation from 2.5 percent to 2.4 percent showed that the gradual slowdown in price pressures continues.

In the Fed's monetary policy decision, especially the course of core inflation and developments in service prices will be closely monitored.