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Consumer prices in check
Inflation report shows overall and core CPI both up less than forecasts.
September 16, 2004: 3:30 PM EDT

NEW YORK (CNN/Money) - Prices paid by consumers edged up only slightly in August, a government report showed Thursday, as inflationary pressure measured below Wall Street expectations.

The consumer price index showed a 0.1 percent increase, compared with a 0.1 percent decline posted in July. Economists surveyed by Briefing.com had forecast a 0.2 percent rise in the broad gauge of retail prices.

The so-called core-CPI, which excludes often volatile food and energy prices, rose 0.1 percent, the same as the increase in July. Economists had also forecast a 0.2 percent rise in the closely watched core-CPI.

The increases mean that overall prices are up 2.7 over the last 12 months, while prices excluding food and energy gained only 1.7 percent in that period. Over the last three months, prices rose at an even slower pace. Overall prices climbed at an compounded annual 1.3 percent rate in the June-July-August period. Excluding food and energy prices rose at a 1.0 percent rate on that basis.

Lower gas prices lead the way

The low inflation in the most recent report was helped by a decline in energy prices, which fell 0.3 percent in August. That drop was led by a 1.4 percent drop in gasoline prices, even as crude oil prices were hitting record levels during the month. Apparel and transportation prices also fell while housing and food costs posted modest gains.

The report was the last major economic reading before Tuesday's meeting of the Federal Reserve's Open Market Committee. The low inflation report is unlikely to stop Fed policy makers from raising interest rates by a quarter of a percentage point for the third time this year.

Prices on the 10-year bond edged slightly higher following the CPI report, while yields, which move in the opposite direction, slipped to 4.15 percent in early New York trading from 4.16 percent before and immediately after the report

Several economists said they believe the Fed will still move ahead with its policy of measured rate hikes at the November meeting, even with this third straight report that shows inflation in check.

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"This was low because of lower energy prices. I don't think that's a decline we can expect to continue," said Anthony Chan, senior economist, J.P. Morgan Fleming Asset Management.

Robert Brusca of FAO Economics, who argues the Fed should not be hiking rates, also said he didn't think the report showing a lack of inflationary pressure will alter the central bank's rate policy.

"The Fed is not focused on inflation, it's focused on inflation in the future," he said. "So a good inflation report doesn't get you anything, while a bad report gets the Fed all excited."  Top of page




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Market indexes are shown in real time, except for the DJIA, which is delayed by two minutes. All times are ET. Disclaimer Morningstar: © 2014 Morningstar, Inc. All Rights Reserved. Disclaimer The Dow Jones IndexesSM are proprietary to and distributed by Dow Jones & Company, Inc. and have been licensed for use. All content of the Dow Jones IndexesSM © 2014 is proprietary to Dow Jones & Company, Inc. Chicago Mercantile Association. The market data is the property of Chicago Mercantile Exchange Inc. and its licensors. All rights reserved. FactSet Research Systems Inc. 2014. All rights reserved. Most stock quote data provided by BATS.