Inflation is still going nowhere
The consumer price index fell 0.1% in August compared to the prior month, which was in line with expectations. It was the first drop in seven months. Compared to a year ago, CPI rose 0.2%, also in line.
Excluding volatile food and energy costs, CPI rose 0.1% in August, and 1.8% year-on-year, missing the estimate for 1.9%.
For a second month, the airline fares index fell sharply, according to the Bureau of Labor Statistics.
In August, the index for fruits and vegetables rose by the highest amount this year. And amid the bird flu outbreak, the egg index is up 35% compared to a year ago.
Economists had forecast that CPI fell 0.1% month-on-month, and rose 0.2% compared to last year. They had estimated that excluding volatile food and energy costs, the index rose 0.1% month-on-month, and 1.9% year-on-year.
The Federal Reserve's interest rate announcement is one day away. And one reason why many experts are not expecting a rate hike is because inflation has been crawling towards the Fed's 2% target.
Although the Fed's preferred measure of inflation is the personal consumption expenditures index, today's reading provides insight into whether inflation is still going nowhere, and the slow pace is truly transitory, as Fed chair Janet Yellen has said.
Capital Economics' Steve Murphy wrote in a note to clients, "Our view remains that the deflationary pressure from low energy prices and a strong dollar will begin to fade early next year. Together with the fact that the economy is already very close to full employment, this suggests that both wages and core inflation will surprise on the upside next year."