US inflation eases to 3.4% in August but remains above Fed target

US consumer-price inflation slowed in August but remained above the Federal Reserve’s target, according to figures released by the Commerce Department on Wednesday. Prices rose 3.4% from a year earlier, below the 3.7% increase economists had forecast. On a monthly basis, prices increased 0.3%, accelerating from July’s 0.1% rise.

The monthly figure indicated that price pressures remained present even as the annual rate eased. Inflation excluding food and energy also came in below expectations. Core prices rose 3% in August compared with the same month a year earlier, while the monthly increase was 0.2%, up from 0.1% in July.

The annual and core readings remained above the Federal Reserve’s 2% inflation target. The supplied report said the August monthly increase suggested inflation was not yet moving decisively back towards that goal. The data came as high prices continued to affect American households and voters ahead of the midterm elections.

Consumer spending increased during the month, while the wider economy was described as showing mostly solid growth and a low unemployment rate. The Federal Reserve raised its key short-term interest rate two weeks before the figures were released, marking the first increase in three years as policymakers sought to combat inflation. Most economists expected at least one more increase this year, possibly as soon as late October.

US markets moved higher immediately after the inflation figures were published. Investors appeared to interpret the data as increasing the possibility that an expected Federal Reserve rate rise could be delayed. The supplied material does not say whether policymakers subsequently changed their plans or provide details of the sectors driving the consumer-price increase.