US consumer prices rose more than expected in August as Hurricane Harvey shut down refineries along the Gulf coast and sent gasoline prices sharply higher.
The headline consumer price index rose 0.4 per cent last month, the biggest one-month gain since January, according to data from the Labor Department on Thursday.
The advance helped push the year-on-year price increase to 1.9 per cent, compared to the 1.7 per cent pace recorded in July.
“Increases in the indexes for gasoline and shelter accounted for nearly all of the seasonally adjusted increase in the all items index,” said the Labor Department.
The energy index rose 2.8 per cent in August as the gasoline index increased 6.3 per cent.
Inflation is a key factor that the US Federal Reserve look at in setting its monetary policy, and persistently sluggish price gains in recent months have dampened expectations for further interest rate rises this year.
While the headline inflation figures came in above market estimates for a 0.3 per cent month-on-month increase and a 1.8 per cent year-on-year rise, most expect the rise in energy costs to be temporary and questions will remain over whether inflation will hit the Federal Reserve’s 2 per cent annual rate target.
Core CPI, which excludes food and energy, gained 0.2 per cent month-over-month — in line with expectations.
Both bonds and the dollar whipsawed after the reading was released.
Yield on the 10-year Treasury note rose to a session high of 2.2234 per cent immediately on the data before retreating again and is currently trading largely unchanged at 2.1953 per cent.
The greenback, as measured by the DXY index, also saw similar moves, rising as much as 0.2 per cent but quickly gave up the gains to trade down 0.1 per cent at pixel time.
Stock futures fell. Those for the Dow Jones Industrial Average shed 31 points, or 0.1 per cent, while S&P 500 futures dropped 6.5 points, or 0.3 per cent and Nasdaq 100 futures retreated 28 points, or 0.5 per cent.