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Much like last week’s companion report from the U.S. Department of Labor on producer (wholesale) prices, this morning’s release of consumer prices for the month of August made for another tame reading on inflation. Specifically, the report showed that the Consumer Price Index was up nominally, on a seasonally adjusted basis, last month.

A closer look reveals that the primary reasons for the slower advance in prices were declines in gasoline and natural gas costs. Indeed, the gasoline index, which increased in June and July, declined 0.1% last month, while the natural gas index fell 2.3%. Overall, energy costs for the consumer fell 0.3% last month. Meanwhile, the food index was up nominally, rising 0.1% in August, the second consecutive monthly gain of 0.1%. The index for all items, excluding the volatile energy and food components, rose a rather pedestrian 0.1%, after increasing 0.2% in each of the previous three months. Overall, the 12-month change in the index for all items was 1.5% in August.

The latest benign reading on inflation is also well below the Federal Reserve’s target level. The Fed’s dual mandate calls for stable prices—which now has been the case for quite some time—and maximum employment. The latter issue is still a major concern. Earlier this month, the Department of Labor reported that the nation created 169,000 jobs in August, but it also revised in payroll figures for June and July significantly lower. Unemployment, at 7.3%, was relatively unchanged, suggesting that much work still needs to be done on the labor front.

Still, despite the tame inflation environment and the weak labor market, we sense that the Federal Reserve will announce tomorrow that it will begin tapering its monthly bond purchases this month. Central bank policymakers have said that they are watching prices at both the producer and consumer levels to ensure that the U.S. doesn’t slip into a period of diminishing increases, or disinflation. A extend period of disinflation or even deflation could compromise U.S. economic growth.

At the time of this article’s writing, the author did not have positions in any of the companies mentioned.