Other contributors to core inflation included a 5.9% monthly surge in airline fares, a 1.0% gain in used car prices, and a 0.5% rise in apparel. In contrast, medical care dipped 0.2%, with declines in dental services and prescription drugs tempering broader service inflation.
Food Inflation Broadens; Groceries Lead the Gains
The food index rose 0.5% in August, with food-at-home jumping 0.6% and all six major grocery categories climbing. Fruits and vegetables soared 1.6%, driven by tomatoes (+4.5%) and apples (+3.5%). Meat, poultry, fish, and eggs rose 1.0%, led by beef prices, which surged 2.7%. Over the past 12 months, the food index increased 3.2%, outpacing headline inflation.
Gasoline Rebounds, Offsetting Energy Services Decline
Energy prices rose 0.7% in August following a 1.1% drop in July. Gasoline climbed 1.9% on a seasonally adjusted basis, reversing the previous month’s losses. However, natural gas fell 1.6%, and electricity edged up only 0.2%. Annual energy inflation remains muted at 0.2%, with gasoline still down 6.6% year-over-year.
Traders Eye September FOMC: Will Persistent Core CPI Trigger Hawkish Signals?
With core inflation remaining sticky at 3.1%, and shelter still exerting upward pressure, traders should expect the Fed to hold rates steady this month while retaining a hawkish tone. The data does little to support near-term rate cuts, especially with food and travel-related costs accelerating.
Market Forecast: Bullish Dollar, Cautious Equities, Yield Curve Pressure Likely
Given the stronger-than-expected inflation print, the U.S. dollar is likely to remain supported, especially against low-yielding currencies. Treasury yields may continue rising on repriced rate expectations, putting pressure on growth stocks and sectors sensitive to financing costs. Equity markets could face short-term volatility as Fed rate cut bets get further pushed out.
