August CPI: Inflation is “Back”

By at 13 September, 2023, 3:41 pm

by Raymond J. Keating – 

Inflation was back in August, reminding everyone that vigilance is vital.

According to the Consumer Price Index (CPI) report from the Bureau of Labor Statistics, inflation jumped by 0.6 percent in August. Inflation had been tame in the three previous months, and in four of the last five. (See the following chart from the BLS report.)

Hopefully, the August jump will prove to be a one-time event. Gasoline price increases accounted for more than half the overall jump in August. But that cannot be assumed, especially given our inflation experience since early 2021 and the loose money that the Fed ran from 2008 through 2021.

Source: Federal Reserve Bank of St. Louis, FRED

The best thing that the Fed could do now is to leave interest rates to the market, and concentrate on reining in the monetary base (the portion of the money supply over which is has direct control). Unfortunately, what the Fed is more likely to do is continue with rate hikes, and thereby create more risks and uncertainties in the economy.

Raymond J. Keating is chief economist for the Small Business & Entrepreneurship Council. His latest books on the economy are The Weekly Economist: 52 Quick Reads to Help You Think Like an Economist and The Weekly Economist II: 52 More Quick Reads to Help You Think Like an Economist.


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