Inflation Slows; Overall CPI Drops in August

Notice how the articles focuses on CPI, which is the more favorable measure, rather than core CPI, which was highlighted when prices were rising at worrying rates and provided the less troubling picture.

From the Wall Street Journal:

U.S. consumer prices fell last month for the first time in nearly two years reflecting a rapid drop in oil prices as well as lower prices for automobiles and housing, which slid for the first time in over five years.

The figures, which included a tame rise in core prices excluding food and energy, should make it easier for Federal Reserve officials to address severe strains in financial markets by cutting interest rates if needed without having to worry about an inflationary outbreak.

Officials meet Tuesday and many economists think with annual inflation rates still quite elevated, officials will stand pat and wait for more information on the economy and markets, although a rate reduction is a possibility.

The consumer price index fell 0.1% in August, the Labor Department said Tuesday, reversing a fraction of the previous month’s 0.8% rise. Excluding food and energy, the CPI advanced 0.2%. The figures were in line with Wall Street forecasts, according to a Dow Jones Newswires survey….

Consumer prices rose 5.4% on a year-over-year basis, down slightly from a 17-year high of 5.6% in July. The core CPI grew a more modest 2.5% compared to August 2007, though that’s still well above the Fed’s long-term goal of 1.5% to 2%. Over the past three months, core inflation rose at a 3.4% annual rate.

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