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CPI increases slightly in August, driven mostly by gasoline and shelter costs

The Bureau of Labor Statistics released the Consumer Price Index for all Urban Consumers (CPI-U) for August 2017 today. Overall prices increased 0.4 percent in August and 1.9 percent since August 2016. It has remained in the range of 1.6 percent to 2.3 percent on an annual basis since June 2011.

Almost all of this increase came from the gasoline and shelter indexes, with the gasoline index increasing 6.3 percent and the shelter index increasing 0.5 percent.

In addition, the rent index increased 0.4 percent. The increasing cost of housing and rent is particularly troubling for working people in a time of low wage growth.

The indices for motor vehicle insurance, medical car, and recreation all increased in August as well. 

A surprising piece of data has been the decelerating cost of medical care. Medical care cost increased a mere 0.2 percent in August and 1.8 percent since August 2016, making it the smallest increase since 1965. This is most likely due to an unusual decline in the pay of doctors, according to the CPI index.

While August registered an increase in the CPI index, overall the data indicate a continued trend of historically low inflation that has been most acutely seen since the onset of the 2007 financial crisis. The persistently low inflation may influence the Federal Reserve to hold off on increasing the federal funds rate, a key short-term interest rate that influences the cost of borrowing.

A graph of the CPI-U (base year = 1967) is show below:

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