Americans have already been feeling the pain at the gas pump as the war with Iran has pushed up prices to record highs for this time of year. But the bigger concern is what happens next.
Persistently higher energy prices – especially for diesel – could continue to push up the cost of freight and become inescapable for businesses, making groceries and other consumer goods more expensive.
That’s why the Federal Reserve is watching Friday’s August Consumer Price Index report even more closely than usual. The latest report is expected to show that inflation cooled slightly on an annual basis — but economists also expect prices to have picked up on a monthly basis. Any hint that price pressures remain stubborn or have broadened across the economy could be enough to convince Fed officials to hike interest rates at next week’s monetary policy meeting.
Economists polled by FactSet expect inflation for the 12 months ended in August to come in at 3.3%, a slight deceleration from July’s 3.4% rate. On a monthly basis, though, price increases are expected to accelerate to 0.4%, compared to July’s 0.1% pace.
When stripping out food and energy prices, a measure of underlying inflation known as “core” inflation is expected to remain relatively tame. Economists expect core prices to rise by 0.2% in August, unchanged from July, bringing the annual rate down to 2.4% from the prior month.
