WASHINGTON—A tightening labor market and growing inflation will lead the Federal Open Market Committee to raise rates later this month, NAFCU Chief Economist and Vice President of Research Curt Long said.
Long pointed to new consumer price data that reveals overall consumer prices rose 0.2% in August – the fifth consecutive month of increases.
"Despite a slowdown in year-over-year growth, prices are rising steadily overall, and recently imposed tariffs will likely add to inflationary pressure," Long said. He added that in addition to a September rate hike, "odds also favor another rate hike in December."
Data published by the Bureau of Labor Statistics show that overall consumer prices decelerated to 2.7% for the 12-month period. Core prices (excluding food and energy costs) increased 0.1% in August compared to the previous month; year-over-year core CPI growth edged down to 2.2%.
Long, in a NAFCU Macro Data Flash report, said gasoline prices and shelter costs were the main contributors to inflation during August: Energy prices rose 1.9% in August following a 0.5% decrease in July. From a year ago, energy prices were up 10.3%.
Food prices were up 0.1% in August; year-over-year growth of food prices increased 1.4%, Long added.
The FOMC, last increased the federal funds target rate by a quarter-point to a range of 1.75 to 2% during its June meeting. The committee is slated to meet again Sept. 25-26.