U.S. consumer prices unexpectedly fell in August as gasoline prices resumed their decline and a strong dollar curbed the cost of other goods, pointing to tame inflation that complicates the Federal Reserve’s decision whether to hike interest rates.
The Labor Department said on Wednesday its Consumer Price Index slipped 0.1 percent last month, the first decline since January, after edging up 0.1 percent in July.
In the 12 months through August, the CPI rose 0.2 percent after a similar gain in July.
Signs of a disinflationary trend reasserting itself are in stark contrast with a rapidly tightening labor market and highlight the dilemma Fed officials face as they contemplate raising interest rates for the first time in nearly a decade.
The U.S. central bank’s policy-setting committee was due to start a two-day meeting later on Wednesday. While solid data on consumer spending, housing and employment have been supportive of a rate hike, the case for higher borrowing costs has been undermined by recent global financial markets turmoil.
“You can make a strong case either way for the Fed to begin raising interest rates or waiting,” said Ryan Sweet, a senior economist at Moody’s Analytics in West Chester, Pennsylvania.
“The prudent risk management approach would argue for them to hold off, but if the Fed was really data dependent there is a very a strong case to raise rates on Thursday,” he said.
The dollar pared gains versus the euro and the yen after the data. U.S. stock index futures were little changed.