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Inflation Slowed A Bit Last Month, But Prices Are Still Rising

NOEL KING, HOST:

Inflation slowed down a little bit last month, but prices are still rising at nearly the highest rate in more than 12 years, which means Americans are paying more for everything, from hamburgers to haircuts. A lot of consumers are starting to think that higher inflation may be with us for a while. Are they right?

NPR's Scott Horsley is following this story. Good morning, Scott.

SCOTT HORSLEY, BYLINE: Good morning, Noel.

KING: So the Labor Department releases its monthly snapshot of inflation, the consumer price index, this morning. And it told us what exactly?

HORLSEY: Well, overall, prices are up 5.3% in the last 12 months. That's down slightly from June and July, when prices were climbing at a pace of 5.4%. Still, inflation is pretty high. Gasoline and groceries are among the big drivers of that. Gas prices are up almost 43% from a year ago. Beef prices are up more than 12%.

Now, food and energy costs are often volatile, so if you take those out of the equation, so-called core inflation was 4% percent over the last 12 months. That's still double the Federal Reserve's long-term target. You mentioned haircuts. Haircut prices are up 5.7% over the last year. And that's kind of a haircut for consumers' buying power.

KING: All right. So inflation is high - not quite as high as it has been. This really hammers home the point that all of this is relative, isn't it?

HORLSEY: That's right. Prices in general are still rising, but not as fast as they were earlier in the year. And if you look at the one-month increase, prices rose three-tenths of 1% between July and August. That's a smaller jump than between June and July, and much smaller than between May and June. So we may have seen the peak of the pandemic inflation wave, although it's coming down slowly.

Some prices are starting to fall. Used cars, which were a big driver of inflation earlier this year, dropped last month - their prices - by 1.5%. We're also starting to see some of the impact of the delta variant in these numbers. People are traveling less, going out maybe a little less frequently. So the price of movie and concert tickets was down in August. And the price of airline tickets dropped pretty sharply.

KING: You know - you do know that both the Biden administration and the Federal Reserve keep saying that they think this period of high inflation is temporary; it's a result of the pandemic. And they've been saying it for a couple months now, which makes me wonder whether people are buying it.

HORLSEY: You know, financial markets are still betting that this is temporary.

KING: OK.

HORLSEY: And most professional forecasters also see inflation moderating, although not right away. Certainly, the numbers we got today seem to support that idea. However, the Federal Reserve Bank of New York just came out with a survey of regular people. And they generally see prices staying higher for longer. On average, consumers expect inflation a year from now to be running at 5.2% - so almost as high as it's been this summer. And three years from now, consumers think inflation will still be 4%.

The Fed keeps a close eye on consumer expectations because if people think prices are going to keep climbing, that can become a self-fulfilling prophecy. So the Fed is certainly on watch for that. It doesn't see signs of that happening just yet, though.

KING: Are rising prices going to be a political problem for President Biden, do you think?

HORLSEY: The White House is certainly sensitive to this. Last week, the administration put out a report suggesting concentration in the meatpacking industry is partly to blame for those grocery prices. So that's maybe a way to deflect a little anger over rising cost of hamburger.

KING: NPR's economics correspondent, Scott Horsley. Thank you, Scott.

HORLSEY: You're welcome. Transcript provided by NPR, Copyright NPR.