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US inflation is slowing in August, even if employee wages are accelerating

US inflation is slowing in August, even if employee wages are accelerating

US inflation slowed more than expected in August, the labor ministry said Thursday, September 13, just days after a separate report showed that employee wages have accelerated during the month.

The consumer price index rose by 2.7% compared to a year earlier, according to the Labor Department's Labor Laboratory. That pace was slower than the average estimate of 2.8% of economists in a study by data provider FactSet. During the previous month, prices rose by a 2.9% clip.

A report from last week showed that the average hourly wage in August was 2.9% higher than a year earlier, the fastest in nine years. Traders speculated that higher wages could eventually lead to faster price increases, but Federal Reserve officials led by Chairman Jerome Powell said they expect a slowdown in inflation in the second half of this year to support their case to continue to attract interest at a gradual pace – instead of walking more aggressively.

Excluding food and energy costs whose prices may be volatile, 12-month inflation was 2.2% in August, up from 2.4% in July.

"A month is not a trend, but according to the Fed, it will play a role in the start of inflation in the first part of this year," said Steve Blitz, American top economist at the TS Lombard prediction firm.

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The government-stimulated economy of President Donald Trump is booming, making unemployment in the US almost 18 years, although this is at the expense of a larger budget deficit of the federal government so that the government debt increased by more than 21 trillion dollars .

Critics of the tax cuts claim that the benefits flowed mainly to the richest people, but the recent rebound in wages showed that employees on average lived up to the cost of living.

The Fed has increased the financing costs since 2015 to prevent inflation from rising. Economists generally expect the central bank to raise interest rates by a quarter of a percentage point at a meeting later this month, the third increase this year.

The August inflation report is likely to do little to change traders' expectations for future Fed rate hikes, "said Charlie Ripley, senior strategist at Allianz Investment Management.

The Standard & Poor's 500-index of shares in the United States rose from 0.6% Thursday to 2,903, while the yield on the 10-year Treasury in the US was unchanged at 2.96%.

"It was a pretty benign report," said Gibson Smith, founder and chief investment officer at Denver-based money manager, Smith Capital Investors, specializing in bonds and other revenue-oriented investments.

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