Higher gas prices lift Fed's preferred inflation gauge but underlying price pressures remain mild

abcnews.go.com:

An inflation gauge closely tracked by the Federal Reserve rose in August, boosted mainly by higher gas prices

WASHINGTON — An inflation gauge closely tracked by the Federal Reserve rose in August, boosted mainly by higher gas prices. But measures of underlying inflation slowed in the latest sign that overall price pressures are still moderating.

Friday's report from the Commerce Department showed that prices rose 0.4% from July to August, up from just 0.2% the previous month. A 10% monthly spike in prices at the gas pump drove the increase.

Excluding volatile food and energy prices, though, “core” inflation rose by the smallest amount in nearly three years, evidence that inflation pressures continue to ease. Fed officials pay particular attention to core prices, which are considered a better gauge of where inflation might be headed. Last month's modest rise in core inflation could raise the likelihood that the Fed will leave interest rates unchanged at its next meeting Oct. 31-Nov. 1.

Core prices edged up 0.1% from July to August, down from July’s 0.2%. It was the smallest monthly increase since November 2020. Compared with a year ago, core prices were up 3.9%, below July’s reading of 4.2%. That was the slowest such increase in two years.

In the meantime, while Americans kept spending in August, they did so at a much more modest pace. Friday’s government report showed that consumer spending, adjusted for inflation, ticked up just 0.1% after having risen 0.6% in July.

“Overall, spending remains positive and inflation is slowing, which will be welcome news to policymakers,” Rubeela Farooqi, chief U.S. economist at High Frequency Economics, said in a note to clients.

Compared with a year earlier, overall prices rose 3.5% in