Agencies Lower gas costs slowed US inflation for a second straight month in August, but most other prices across the economy kept rising — evidence that inflation remains a heavy burden for American households.Consumer prices surged 8.3 percent last month compared with a year earlier, the government said Tuesday, down from an 8.5 percent increase in July and a four-decade high of 9.1 percent in June. On a monthly basis, prices rose 0.1 percent, after a flat reading in July.But excluding the volatile food and energy categories, so-called core prices jumped 0.6 percent from July to August — up sharply from 0.3 percent the previous month and dashing hopes, for now, that core prices would moderate. And in the year ending in August, core prices leapt 6.3 percent, up from 5.9 percent in July.Core prices typically provide a clearer read on where costs are headed than overall inflation. Rents, medical care services and new cars all grew more expensive last month.Stock prices tumbled and bond yields rose on the worse-than-expected core figures, with many investors fearful that the Federal Reserve will turn even more aggressive in its drive to curb inflation. The Dow Jones industrial average sank nearly 900 points in mid-day trading.Further Fed rate hikes could weaken growth so much as to push the economy into a recession. Some economists now expect the Fed to raise its benchmark short-term rate, currently in a range of 2.25 percent to 2.5 percent, to 4.5 percent or higher by early next year. That would make it even harder for the central bank to meet its goal of achieving a “soft landing,” whereby it would tame inflation without causing a recession.“This was a disappointing report,” said Laura Rosner-Warburton, senior economist at MacroPolicy Perspectives. “It raises the risk of higher interest rates and a hard landing for the economy.” Chair Jerome Powell is expected to announce another big increase in the Fed’s key rate next week, which will lead to higher costs for consumer and business loans.Inflation is higher than many Americans have ever experienced, escalating families’ grocery bills, rents and utility costs, among other expenses. It has deepened gloom about the economy despite strong job growth and low unemployment.Republicans have sought to make inflation a central issue in the midterm congressional elections. They blame President Joe Biden’s $1.9 trillion stimulus package passed last year for much of the increase. Many economists generally agree, though they say that snarled supply chains, sharp pay increases and Russia’s invasion of Ukraine have also been key factors in the inflation surge.At the same time, the drop in gas prices — for consumers, perhaps the most visible barometer of inflation — could bolster Democrats’ prospects in the midterm elections. It may already have contributed to slightly higher public approval ratings for Biden.In a statement Tuesday, the president said, “Overall, prices have been essentially flat in our country these last two months. That is welcome news for American families, with more work still to do.” In his speeches, Biden has generally stopped referring to the impact of inflation on family budgets. He has instead highlighted his administration’s recent legislative accomplishments, including a law enacted last month that’s intended to reduce pharmaceutical prices and fight climate change.Nationally, the average cost of a gallon of gas has dropped to $3.71, down from just above $5 in mid-June. But grocery prices have continued to rise rapidly, jumping 0.7 percent from July to August. In the past year, they have soared 13.5 percent — the biggest 12-month increase since 1979.Chicken prices have risen nearly 17 percent in the past year. And egg prices surged 2.9 percent just in August from July and are up nearly 40 percent from a year ago.Worsening food inflation is a particular strain on lower-income families, more of whom have had to turn to food banks and other aid as inflation has worsened. Mary Jane Crouch, executive director of America’s Second Harvest of Coastal Georgia, which works with a network of food banks, said 38 percent more food was distributed in August compared with July.Though much of the food is donated, Crouch said her organization buys some of it and has faced sharp increases in meat and dairy prices in the past few months.And the prices of many other goods are still rising even as supply chain snarls unravel, said Rosner-Warburton, the MacroPolicy economist.
