Consumer Price Index Soft In August

Consumer prices came in soft in August and will not be turning up the heat on the doves at the FOMC. Pressured by gasoline, the CPI fell 0.1 percent in August with the year-on-year rate up only 0.2 percent. The core, which excludes energy and food, rose only 0.1 percent with the year-on-year rate steady at plus 1.8 percent and still under the Fed's 2 percent goal. And details are soft. Energy prices fell 2.0 percent in the month including a 4.1 percent decline for gasoline. Airfares were down sharply for a second month, 3.1 percent lower. Owners equivalent rent, which had been hot, rose only 0.2 percent in the month. Showing some pressure is apparel, up 0.3 percent for a second straight month in what hints at back-to-school price traction. Otherwise, components are flat to steady such as food at plus 0.2 percent or medical care at no change. The 1.8 percent year-on-year core rate does catch the eye but with commodity prices soft and foreign economies weak, the outlook for price acceleration remains elusive.

Recent History Of This Indicator: Lower gasoline prices are expected to hold the consumer price index to no change in August, but when excluding food and energy, prices are expected to rise 0.2 percent. Still, a 0.2 percent gain for the core would not scramble the outlook of the week's FOMC meeting. One component to watch is owners equivalent rent which posted sizable gains of 0.3 and 0.4 percent in July and June, reflecting tight supply in the housing