ICS Magazine

Jump in energy costs lift consumer prices 0.3 percent in August

September 16, 2003
WASHINGTON (AP) -- Consumer prices rose by 0.3 percent in August, the largest increase in five months, reflecting in part a jump in the cost of gasoline that pinched motorists' pockets.

The latest reading on the Consumer Price Index, the government's most closely watched inflation barometer, came after increases of 0.2 percent in June and July, the Labor Department reported Tuesday. August's performance matched economists' expectations.

"Energy prices were the villain again," Ken Mayland, president of ClearView Economics, said of the August CPI report.

Excluding energy and food prices, which tend to swing widely from month to month, "core" consumer prices nudged up by just 0.1 percent in August, down from a 0.2 percent increase the previous month. The showing on the core inflation rate suggested that most other prices are moderate and marked a slightly smaller increase than the 0.2 percent rise that economists were forecasting.

Even with recent increases in the CPI, Fed policy-makers have expressed more concern about inflation going down, rather than up.

Economists have said that the current climate of generally low levels of inflation allows policy-makers with the Federal Reserve Board, who were meeting Tuesday, the leeway to keep a key short-term interest rate at a 45-year low of 1 percent.

At previous Fed meetings and in speeches, Fed Chairman Alan Greenspan and his colleagues have talked about the importance of being on guard against the remote threat of deflation, an economically dangerous and widespread price decline, because of its potential to wreck the economy.

But with the economy showing signs of gaining traction, deflation fears should ease, some economists said.