San Francisco Frontiers - US consumer inflation ticks up in August on gasoline prices

The consumer price index (CPI), a key inflation gauge, jumped 3.7 percent from a year ago, picking up pace from July's 3.2 percent figure, said the Labor Department. But a measurement stripping out volatile segments cooled.

All eyes are on the report, which is expected to have a bearing on the US central bank's interest rate decision released next week.

The Federal Reserve has lifted the benchmark lending rate rapidly since March last year to tamp down demand and sustainably lower inflation -- but the current figure remains stubbornly above officials' two percent goal.

In August, higher gasoline costs bumped up headline inflation but the "core" reading -- removing the volatile food and energy components – cooled to 4.3 percent on an annual basis.

"The index for gasoline was the largest contributor to the monthly all items increase, accounting for over half of the increase," said the Labor Department.

The department added that the shelter index, which takes into account rent, continued advancing -- rising for a 40th consecutive month.

Between July and August, CPI rose 0.6 percent, accelerating from the prior month too.

While the latest report could give the Fed some pause, analysts expect it may not translate to further rate hikes.

If "core" readings continue to weaken, "that will be taken as a sign by the Fed that perhaps further tightening is not necessary," said Gregory Daco, EY chief economist.

- 'Cautious' -

"The paradigm for Fed policymakers has shifted away from tighten at all costs to tighten only as certain conditions are being met," Daco said.

These conditions include whether or not domestic demand is stronger than expected and whether the labor market is still hotter-than-hoped.

The Fed is likely to be more focused on underlying inflation when it comes to formulating monetary policy, said economist Nancy Vanden Houten of Oxford Economics.

"We think they’re going to be quite cautious about lowering rates," she told AFP.

"We think that they're done raising interest rates. We think the risk remains for more rate increases, but we certainly don't expect one next week," she added.

Most recently, the central bank raised rates to the highest level in 22 years.

"The next move from the Fed will be a cut in rates but we don't expect that to happen until the middle of next year," Vanden Houten said.

C.Diaz--SFF