USD Jump on All Fronts, As Core CPI US Inflation Remains High

The US Dollar retreated lower yesterday as traders squared their positions ahead of the US inflation report for August, but has jumped higher after the CPI data. The headline inflation continued to fall, getting close to the FED target, but core CPI remains high, showing  that core prices for goods continue to increase at a considerable speed.

The August CPI report below shows continued moderation in headline inflation, with headline CPI increasing at its slowest annual rate since February 2021. While core inflation remains somewhat elevated, shelter costs continue to drive much of the price pressure, contributing over 70% to the increase in core prices. Energy prices declined both on a monthly and yearly basis, helping to keep overall inflation contained.

Despite some strength in categories like airline fares and motor vehicle insurance, the overall inflationary environment appears to be stabilizing, with real earnings improving, which could ease concerns of prolonged price pressures. However, the persistently high shelter costs and certain services like medical care and education still present a challenge for policymakers. These mixed signals suggest that the Federal Reserve may need to remain cautious about future rate decisions, as inflation is cooling but not yet fully tamed.

US August 2024 Consumer Price Index Report