US consumer price growth cools to smallest gain in seven months

PRICES paid by US consumers rose in August by less than forecast, posting the smallest gain in seven months and suggesting that some of the upward pressure on inflation is beginning to wane.

The consumer price index increased 0.3 per cent from July, according to Labor Department data released on Tuesday. Compared with a year ago, the CPI rose 5.3 per cent. Excluding the volatile food and energy components, so-called core inflation climbed 0.1 per cent from the prior month, the smallest gain since February.

Economists in a Bloomberg survey called for a 0.4 per cent increase in the overall CPI from the prior month and a 5.3 per cent gain from a year earlier, based on the median estimates. Faced with mounting cost pressures as a result of materials shortages, transportation bottlenecks and hiring difficulties, businesses have been boosting prices for consumer goods and services.

While price spikes associated with the economy's reopening are beginning to abate, tenuous supply chains could linger well into 2022 and keep inflation elevated.

The CPI data precede next week's Federal Open Market Committee meeting, where Fed officials will debate how and when to begin tapering asset purchases.

Fed chair Jerome Powell said last month that the central bank could begin reducing its monthly bond purchases this year, but didn't give a specific time line. BLOOMBERG