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This morning the Bureau of Labor Statistics reported that the Consumer Price Index (CPI) rose 0.3% in August (on a seasonally adjusted basis.) That comes after a 0.5% increase in July. Year over year the headline CPI rose 5.3% in August. That’s slightly below the 5.4% 12-month increase in July.

The indexes for gasoline, household furnishings and operations, food, and shelter all rose in August. The energy index increased 2.0%, mainly due to a 2.8% increase in the gasoline index. The index for food rose 0.4%, with the indexes for food at home and food away from home both increasing 0.4%.

Core inflation–that is inflation without energy or food prices–rose just 0.1% in August. That was the smallest monthly increase since February 2021. The core inflation rate was up 4.0% over the last 12 months in August. That’s again a smaller increase than in the 12 months ending in July.

Stocks initially rose on the news with the Standard & Poor’s 500 opening at 4479, up from the September 13 close of 4460. First thought, I’d say, was that inflation for August had come in below economist expectations and that supported the Federal Reserve’s position that high inflation was transitory and that inflation would fall as the economy worked through Pandemic supply chain glitches. The lower than expected inflation number made it likely that the Fed would delay even longer before starting to reduce its $120 billion in month bond purchases.

But the market has had second thoughts about that. At 3 p.m. the S&P 500 was off 0.68% and the Dow Jones Industrial Average was lower by 0.97%. The NASDAQ Composite was down 0.55% and the small cap Russell 2000 index had tumbled 1.27%.

The thinking seems to be that the reduction in the inflation rate is so small that it’s hard to call it a turning point back toward the Fed’s 2% target.

The CBOE S&P 500 Volatility Index (VIX) was up 4.28% to 20.20 as of 3 p.m.