Many of us thought inflation was starting to fade, but the government's report on consumer prices this morning showed that it's sticking around.
The Consumer Price Index (CPI) rose 0.1% in August after staying flat in July, as food, housing, and medical costs soared. At the grocery store, prices jumped 0.8% in August, making for an 11.4% gain over the last year—the biggest since 1979. Housing and shelter costs swelled too, growing 6.2% year-over-year.
True, you probably paid less at the pump in August, as gas prices fell 10.6%. But that was just about the only place we got a break—at the car dealership, new vehicles were 10.1% more expensive than a year ago.
The net effect meant that the CPI was up 8.3% from a year ago, down from July's 8.5%, but still higher than the 8.1% economists had expected.
Core inflation, which excludes volatile food and energy categories, rose 0.6% in August, twice as fast as it did in July, suggesting that inflation might be sticking around longer than many of us had hoped. Major stock indexes were down this morning on the news.
So what does this mean for your finances?
Aside from the fact that most things got more expensive, economists say the surge in core inflation all but guarantees the Federal Reserve will give its benchmark interest rate another super-sized hike later this month in a bid to get inflation under control. That means higher interest rates on your credit cards and other bank loans, and possibly higher mortgage rates too.
And that wasn't the only big government report that came out today. The Census Bureau's report on income and poverty showed that while average income stayed flat in 2021, both overall poverty and child poverty hit record lows since at least 2009, thanks to the temporarily expanded child tax credit and other pandemic relief payments.
- Diccon
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