Inflation Stabilizes in August

by Patrick Lunsford CollectionIndustry.com

Weakening gas and home prices caused inflation to moderate in August, the U.S. Labor Department reported Friday.

The closely-watch consumer price index (CPI) increased 0.2% in August, while the core CPI ? which excludes energy and food costs ? also increased 0.2% in the month. July saw the CPI increase at a 0.4% rate.

While the numbers meet the expectation of Wall Street analysts and economists, some cautioned that the lower numbers were not necessarily as good as they could have been. Stephen Stanley, chief economist for RBS Greenwich Capital, told MarketWatch that both the CPI and core CPI were very close to rounding up to 0.3%.

The core CPI is now up 2.8% in the past twelve months, the biggest gain since December 2001, and the measure has increased at a 3% annual rate so far this calendar year.

Many bankers and economists are hoping that the relatively tame figures for August will compel the Federal Reserve to hold interest rates at 5.25%. The Fed Open Market Committee meets next week to decide on interest rates. There is even a growing group of economic watchers that say the next Fed move will be a decrease in interest rates.