got harder to ignore with Wednesday’s release of the consumer price index for August.in August, snapping a three-month streak of lowish monthly inflation figures that had given confidence to investors and Federal Reserve officials that monetary policy was restrictive enough to bring inflation down to the two percent target over time. This was, when it rose at the hyperspace pace of 1.8 percent.The energy index rose 5.6 percent in August and all the major energy component indexes increased.
Raising an interest rate target is unlikely to have a short-term effect on oil or gasoline prices, the proponents of this view say, so these prices should be disregarded when the Fed sets policy. Although plausible on the surface, this edifice crumbles quickly under the weight of a moment’s analysis. The oil producers certainly believe that higher interest rates can depress demand for petroleum products, including gasoline. To the extent that higher rates slow down the economy by diminishing overall demand or crowding out private investment, thenWhat’s more, it’s not clear that higher oil prices really create illusory inflation in the headline number.
, up from 0.2 percent, according to the Federal Reserve Bank of Cleveland. The 16 percent trimmed mean measure did the same thing, rising from 0.2 percent to 0.3 percent. The Fed is still likely to hold rates steady at the next meeting, but the August inflation figures likely set the. Market odds of a move higher in the final two months of the year were unchanged at just over 40 percent on Wednesday, around where they’ve been for the past week.
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