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While consumer prices eased slightly during August, inflation remains above an 8% year-over-year rate for the sixth consecutive month, according to data from the Bureau of Labor Statistics. According to the NAHB, while it is likely that Consumer Price Index (CPI) and Personal Consumption Expenditure (PCE) measures of inflation have peaked, the Federal Reserve is still expected to remain aggressive with respect to tightening monetary policy.

The Bureau of Labor Statistics (BLS) reported that the Consumer Price Index (CPI) rose by 0.1% in August on a seasonally adjusted basis after being unchanged in July. The price index for a broad set of energy sources fell by 5.0% in August as a decline in gasoline (-10.6%) offset an increase in electricity (+1.5%) and natural gas index (+3.5%). Excluding the volatile food and energy components, the “core” CPI increased by 0.6% in August, following an increase of 0.3% in July. Meanwhile, the food index increased by 0.8% in August, the smallest monthly increase since December 2021.

During the past twelve months, on a not seasonally adjusted basis, the CPI rose by 8.3% in August, following an 8.5% increase in July. The “core” CPI increased by 6.3% over the past twelve months, following a 5.9% increase in July. The food index rose by 11.4% and the energy index climbed by 23.8% over the past twelve months.

The index for shelter, which makes up more than 40% of the “core” CPI, rose by 0.7% in August, following an increase of 0.5% in July. The indexes for owners’ equivalent rent (OER) and rent of primary residence (RPR) both increased by 0.7% over the month. Monthly increases in OER have averaged 0.7% over the last three months. More cost increases are coming from this category, which will add to inflationary forces in the months ahead. These higher costs are driven by lack of supply and higher development costs. Higher interest rates will not slow these costs, which means the Fed’s tools are limited in addressing shelter inflation.

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