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14 Sep
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Inflation Came in Faster Than Expected in August Even as Gas Prices Fell

Prices climbed 0.1 percent from July as rapid increases hit a variety of products and services, including food away from home, new cars, dental care and vehicle repair. Given how much gas prices fell in August, the price index had been forecast to decline on a monthly basis.

The upshot is that inflation retains a surprising amount of underlying momentum, which is bad news for Fed officials. Central bankers have been looking for a sustained slowdown in price increases as evidence that their policies are working to cool demand and nudge the economy back toward a healthy environment in which inflation is slow, steady and barely noticeable.

Until that happens, officials have pledged to continue raising interest rates quickly, which can slow borrowing, constrain consumer demand and tamp down hiring and wage growth.

“Inflation is far too high, and it is too soon to say whether inflation is moving meaningfully and persistently downward,” Christopher Waller, a Fed governor, said in a speech last week. “This is a fight we cannot, and will not, walk away from.”

So far, there is little sign that the Fed’s efforts are tanking consumer and business demand. Growth has slowed, but it has not plummeted, and both hiring and wage gains remain rapid. Employers added 315,000 jobs last month, job openings remain high and consumer spending has continued to eke out gains, albeit decelerating ones, this summer.

“Inflation remains hot, financial conditions have seen some improvement and the labor markets are humming along,” Neil Dutta, head of U.S. economics at Renaissance Macro, wrote in a research note after the release. “If the goal is to slow things down and create some pain, the Fed is failing by its own standard.”

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