Senior economics reporter
Apparel prices were a drag on consumer prices in August.
The numbers: The consumer-price index rose 0.2% in July, as rising shelter costs offset a decline in energy prices. Economists surveyed by MarketWatch had forecast a 0.2% increase.
The increase in the CPI over the past 12 months was 2.9%, unchanged from June. After stripping out volatile gas and food, the more closely followed core rate of inflation rose 0.2% last month. The 12-month rate of core inflation rose to 2.4%, the highest rate since September 2008.
Economists focus more on core inflation because it tends to predict future price trends better than the headline number.
What happened: The rise in the cost of living last month was driven by shelter costs, which rose 0.3% in July and accounted for nearly 60% of the increase for the CPI. The cost of food rose by 0.1%. Energy costs fell by 0.5% last month.
The gain in the core was led by several categories including shelter, used cars and trucks, household furnishing and recreation. The indexes for medical care and apparel declined in July.
The steady uptick in inflation is taking a bite out of household income. Real or inflation-adjusted hourly wages was flat in July, and they were down 0.2% over the past year.
Big picture: Core inflation has been trending higher but economists see signs that it will moderate in coming months. But with prices rising, the low unemployment rate and a strong economy, the Fed is expected to raise interest rates in September.
Chicago Fed President Charles Evans said he thought inflation wouldn’t exceed 2% by too much and that a restrictive monetary policy may be needed next year or in 2020.
Read: Inflation above 2% is nothing to worry about, Fed’s Evans says
What are they saying: While used car prices were surprisingly strong and rents keep rising, Omair Sharif, senior U.S. economist at Société Générale, said that headline and core inflation will moderate by the end of the year.
“To me, for people looking for inflation overshoot, this is as good as it gets for them,” Sharif said in a phone interview.
Market reaction: U.S. stocks DJIA, -0.85% sank on Friday on fears of a mounting currency crisis in Turkey. The Dow was down 222 points to 25,284 in morning trading. The yield on the benchmark 10-year Treasury TMUBMUSD10Y, -1.42% moved after the data but was lower for the day at 2.88%.