US: Core inflation on the rise – ABN AMRO

Han de Jong, chief economist at ABN AMRO, points out that the US headline inflation, on the CPI measure, eased from 1.8% yoy in July to 1.7% in August and was largely thanks to the easing of energy prices.

Key Quotes

“The core-CPI measure amounted to 2.4% yoy, up from 2.2% in July, the third consecutive month of accelerating inflation. The Fed’s preferred inflation measure is core PCE inflation, which only stood at 1.6% yoy in July.”

“The acceleration of core-CPI inflation was largely caused by a faster increase in medical care costs: 4.3% yoy. Medical care has an 8.9% weight in the core basket, so it is responsible for some 0.3%-points of the yoy change of the core CPI. Health insurance has a weight of only 1.5% in the core basket. But health insurance is becoming more expensive very rapidly. In August, it was up a staggering 18.6% yoy, also responsible for 0.3%-points of the 2.4% yoy rise of the core CPI.”