The consumer price index rose 0.4 percent with core up 0.3 percent. The Fed will hike. 
The BLS reports the Consumer Price Index for All Urban Consumers (CPI-U) increased 0.4 percent on a seasonally adjusted basis in August after rising 0.1 percent in July, the U.S. Bureau of Labor Statistics reported today.
Over the last 12 months, the all items index increased 3.4 percent before seasonal adjustment.
The BLS rounds to 1 decimal point. I calculate 2 decimal places
CPI Month-Over-Month
- All Items: 0.40 percent
- All Items Excluding Food and Energy: 0.29 percent
- Food and Beverage: 0.12 percent
- Shelter: 0.26 percent
- Owners’ Equivalent Rent: 0.19
- Rent of Primary Residence: 0.17
- Medical Care Services: -0.25 percent
- Medical Care Commodities: -0.23 percent
- Energy: 2.10 percent
- Gasoline: 3.90 percent
- Food at Home: 0.04 percent
- Food Away from Home: 0.25
The only bright spot, assuming you believe it, is medical care services.
CPI Month-Over-Month Energy, Gasoline, Utilities
Energy, Gasoline, Utilities and Fuel Month-Over-Month
- Energy: 2.10 percent
- Gasoline: 3.90 percent
- Utilities and Fuel: 0.06
Looking ahead, Trump’s moves in the strait will cause gasoline prices to jump again in September.
CPI Month-Over-Month Food
August Food
- Food and Beverage: 0.12 percent
- Food at Home: 0.04 percent
- Food Away from Home: 0.25 percent
The BLS weights food at home as 8.23 percent of the CPI. It weights food away from home at 5.29 percent of the CPI.
Actual spending is reversed. Thus, the food and beverage percent is much higher every month than reported.
CPI, Shelter, and PCE Year-Over-Year Percent Change
Year-Over-Year CPI and PCE
- CPI: 3.4 percent
- CPI Shelter: 3.0 percent
- CPI Excluding Food and Energy: 2.4 percent
- PCE: 3.7 Percent (July)
- PCE Excluding Food and Energy: 3.3 Percent (July)
CPI Year-Over-Year Food
CPI Year-Over-Year Food Details
- Food and Beverage: 2.9 percent
- At Home: 2.7 percent
- Away from Home: 3.4 percent
Because the BLS underweights food at home and does not include tips at all, food and beverage at 2.9 percent is hugely understated.
Food is 13.52 percent of the CPI
CPI Core Services vs PCE Less Food and Energy
Year-Over-Year CPI Core Services and PCE Less Food and Energy
- CPI Core Services: 3.02 percent
- PCE Less Food and Energy (July): 3.34 percent
I fail to see how anyone can get a rate cut or even a rate hold out of that chart.
The Fed’s preferred measure of inflation is PCE less food and energy. The Fed is also concerned about core services.
The Fed has missed inflation targets for 62 straight months on PCE and 65 straight months on the CPI.
CPI and PCE Are Understated
- Neither measure counts property taxes, homeowner’s insurance, or home prices.
- Food is understated because of improper weights.
- Medical insurance costs are more than a bit suspect.
Yet, economists wonder why people are more upset about inflation than what the numbers show.
Fed Rate Hike Coming
A rate hike in September is all but certain after this report.
For discussion, please see Hello Nay Sayers, the Fed Hikes Interest Rates in 5 Days, Odds 85 Percent
A rate hike is now a done deal, as expected in this corner.
Agreed. They can’t hike in October right before the election and they can’t sit with their hands tied until after the election. So now is the time to do it. It will be great to see Trump crying about this one! But no one can’t fight gravity forever.
The deficit for the 11 months ended August 31 was $1.965T. The impact of another .25% on over $40T in total debt is not insignificant.
A democratic congress is going to inherit a total f’ing mess. Military wars, Trade wars, tariffs, deficits, a moron as President, a packed administration and Supreme Court, and allies wondering WTF.
Cleaning all that up with both hands tied behind your back is not a job any sane person would want.
Not to mention insane car costs (new and used are out of control) and car insuance costs. As many have cars ncessary for work, etc.
OMG, an anticipated whole 1/4 point increase. Sheese. Let me tear my hair out.
Ya on top of everything else, Curly.
The current clowns are not the first to suggest that the US “can grow itself out of debt” but the concept is absurd at this point
Managed defaults make a lot more sense
With Bessent doing a treasury operation twist exchanging long bonds for short term bills, he may be doing the taxpayer a disservice by subjecting greater amounts of federal debt to rising interest rates. with the government pushing more debt supply on the market they will need to pay more no matter the duration to sell it. The only way to get debt service expense down is to lower the debt, Hello congress! That is your job.
This is the logical conclusion. They think economic repression will work because it worked after WWII, but we were in such a favorable position post-WWII that anything would’ve worked.
They’re also banking on AI increasing growth, but we found the asymptote of AI. Alignment. There comes a point where something smarter than you is just smarter than you, and you won’t be able to control it. Not apocalyptic AI, but if you can’t control your tool, you can’t use it. The models will have to be lobotomized versions of themselves to be able to be controlled which will prevent them from reaching the potential that investors are banking on. This is the asymptote.
So what do we have? A seriously flawed plan, no magic tech solution, and an economy so overleveraged that we can’t raise rates. Inflation will only accelerate as the corrupt leadership spends more and more in vain efforts to stimulate growth and save equities.
Eventually, they’ll have to sacrifice equities to save the bond market. If they don’t, it’ll require more and more gov spending and magic fedbucks to prop up both markets. That leads to one place, socialism, as more and more people become disenfranchised by higher and higher prices.
If you worked hard and did everything right, but you still get priced out and made irrelevant to the economy, why wouldn’t you give up on capitalism?
They have us splitting hairs over whether the rate hike will be tiny or less tiny. The problem is entrenched and systemic, so what’s the point debating how tiny any rate hikes will be? Rates will never be restrictive again until something very grave happens, so what’s the point?
It’s just a game. What we’re really discussing is how little do they need to hike rates to convince the world that the central bank isn’t a sham.
Mish already said it. 62 months over target. Nobody cares.
I’m assuming a new FACO: Fed Always Chickens Out. This election season is not a time for me to bet against more institutional decay.
If they only do 1/4, long bond yields rise.
Agreed. A 1/4 point move now followed by nothing in Oct (due to the election) is unlikely to have any noticeable effect on inflation driven by a supply side shock. There’s not going to be enough demand destruction from a 1/4 point rise in the Funds rate. The Fed is once again way behind the curve. The rise in bond yields seems unlikely to be quelled by 1/4 point.
No doubt now. Let the good times roll.