U.S. consumer prices fall in August

ANNUAL United Kingdom consumer prices index inflation fell back to zero in August, the latest official figures show, underlining the country’s continuing economic challenges.

Buyer prices increased by 0.2 per cent this month, but remained stable since past year, according to the Office for National Statistics.

The news has reinforced expectations that interest rates are set to remain low for now.

“Once the impact of the stronger dollar and lower commodity prices fade next year, there is still every reason to expect <strong>inflationstrong> to accelerate, particularly when the <strong>economystrong> is apparently already close to full employment”, economist Steve Murphy of capital economics wrote in a note to clients Wednesday. Most economists polled by Reuters last week forecast the BoE would start to raise rates early next year, but financial markets think it will be rather later in 2016.

For markets, the Fed’s use of the PCE instead of the CPI as their preferred inflation measure has put off a rate hike this entire year until MAYBE tomorrow or not.

The first monthly headline inflation fall since January was also influenced by lower than expected rent and education prices, Goldman Sachs noted. In the 12 months through August, the CPI rose 0.2 percent after a similar gain in July.

This sort of increase “would normally worry policymakers into a pre-emptive hike in interest rates to avoid upward wage pressures feeding through into higher inflation”, said Williamson.

Also on Wednesday, a separate Labor Department report showed Americans’ inflation-adjusted weekly earnings grew 0.7 per cent in August.

The USA consumer prices have suddenly dropped in August as the prices of gasoline returned to their decline. The WPI for July, 2015 was minus 4.05 per cent. Big fall is reported in prices of minerals, fuel, petrol and high speed diesel.

“Low inflation supports living standards by boosting disposable income and will help to sustain the economic recovery”. There were also increases in prices for tobacco and apparel.

Medical care services had no change and has increased 2.2% for the year.

Michael Montgomery, US Economist at IHS Global Insight said he predicted there wouldn’t be a rise in September.

He said this “could be a sign inflationary wage pressures are starting to build”.

She said the current position and the possiblity of a return to negative inflation was likely to prompt the Bank of England to hang fire on any rise in interest rates.