"Prices are still pretty benign, but I think from the Fed's point of view they're moving in the right direction."
- Omair Sharif, an economist at RBS Securities Inc.
The cost of living in the world's largest economy advanced less than analysts expected in August, reinforcing a view it will take more time to achieve the Fed's goal. The U.S. Labor Department said the Consumer Price Index ticked up 0.1% in August from July, when they rose 0.2%, and below analysts' forecasts, who predicted the same figure as it was recorded in July. On an annual basis, CPI slowed to 1.5%, from 2.0% advancement in July. Stripping out the energy and food prices, the core inflation rate rose 0.1% after increasing by 0.2% in each of the last three months. A separate report on Friday showed producer prices inflation rose more than expected, inching higher 0.3%.
The modest albeit steady pace of growth in consumer prices may ease some concerns among U.S. policymakers about the disinflationary trend becoming entrenched. Earlier the Fed officials claimed they are watching CPI and PPI to ensure the economy does not slip into a long period of diminishing increases. Meanwhile, the Federal Reserve is beginning its two-day long meeting to debate whether the economy is strong enough to begin slowing the pace of monthly bond purchases. 38% of economists are expecting the U.S. central bank to lower its monthly bond purchases. Another 35% are seeing a similar move only during the October or December meeting.
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