Consumer Price Index: August Headline at 1.9%

The Bureau of Labor Statistics released the August Consumer Price Index data this morning. The year-over-year non-seasonally adjusted Headline CPI came in at 1.94%, up from 1.73% the previous month. Year-over-year Core CPI (ex Food and Energy) came in at 1.68%, down fractionally from the previous month's 1.69%.

Here is the introduction from the BLS summary, which leads with the seasonally adjusted monthly data:

The Consumer Price Index for All Urban Consumers (CPI-U) rose 0.4 percent in August on a seasonally adjusted basis, the U.S. Bureau of Labor Statistics reported today. Over the last 12 months, the all items index rose 1.9 percent.

Increases in the indexes for gasoline and shelter accounted for nearly all of the seasonally adjusted increase in the all items index. The energy index rose 2.8 percent in August as the gasoline index increased 6.3 percent. The shelter index rose 0.5 percent in August with the rent index up 0.4 percent. The food index rose slightly in August, with the index for food away from home increasing and the food at home index declining.

The index for all items less food and energy rose 0.2 percent in August. Along with the shelter index, the indexes for motor vehicle insurance, medical care, and recreation all increased in August. The indexes for airline fares and for used cars and trucks were among those that declined in August. [More…]

Investing.com was looking for a 0.3% increase MoM in seasonally adjusted Headline CPI and 0.2% in Core CPI. Year-over-year forecasts were 1.8% for Headline and 1.6% for Core.

The first chart is an overlay of Headline CPI and Core CPI (the latter excludes Food and Energy) since the turn of the century. The highlighted two percent level is the Federal Reserve's Core inflation target for the CPI's cousin index, the BEA's Personal Consumption Expenditures (PCE) price index.

Headline and Core CPI since 2000

The next chart shows both series since 1957, the year the government first began tracking Core Inflation.

Headline and Core CPI

In the wake of the Great Recession, two percent has been the Fed's target for core inflation. However, at their December 2012 FOMC meeting, the inflation ceiling was raised to 2.5% while their accommodative measures (low Fed Funds Rate and quantitative easing) were in place. They have since reverted to the two percent target in their various FOMC documents.

Federal Reserve policy, which in recent history has focused on core inflation measured by the core PCE Price Index, will see that the more familiar core CPI is currently at the PCE target range of 2 percent.