Latest U.S. inflation figures
The latest inflation figures for the U.S. show that the annual inflation rate rose to 3.7% in August 2021, up from 3.2% in July 2021. This was mainly driven by a sharp increase in energy prices, which jumped up 10.5% over the last month. Gas (petrol) prices accounted for more than half of the increase in the overall inflation rate.
Core inflation
However, core inflation, which excludes the volatile food and energy sectors, slowed down to 4.3% in August 2021, down from 4.7% in July 2021. This suggests that the Federal Reserve’s ’11’ rate hikes are having some effect on cooling the inflationary pressures in the economy. Some sectors, such as used cars, medical care services and airfare, saw price decreases in August 2021.
Will the Fed keep interest rates unchanged at its next meeting on September 20, 2021, as we wait to see the full impact of its previous rate hikes on the economy?
However, the Fed may still raise interest rates later this year if inflation remains persistently above its target of 2%. Higher interest rates could introduce more volatility to the U.S. economy and potentially trigger a recession.