From the Gulf to the pump: how gas prices drive inflation

August saw a significant increase in gas prices and inflation, reaching 3.7%, the highest monthly jump since June 2022. These figures come from the Consumer Price Index (CPI) published by the Bureau of Labor Statistics (BLS).

Compared to the previous month, annual inflation has grown from July’s 3.2%. However, this monthly increase of 0.6% was in line with economists’ predictions. In fact, a Reuters survey had forecasted an annual increase of 3.6% and a monthly increment of 0.6%.

A key factor in this rise was the surge in gas prices, which experienced an increase of over 10% in August. This phenomenon accounted for more than half of the monthly increment. The causes? The rise in oil prices and heatwaves in the Gulf of Mexico, which slowed down refining and production activities, reversing the trend of previous months.

Gas prices, housing and food prices have also remained high

In particular, housing costs, which have been increasing for 40 consecutive months, have recorded their lowest increment since 2021.

The Federal Reserve’s reaction to these August inflation data remains uncertain. On one hand, there are signs that prices are moderating. This, along with a recent labor report showing signs of cooling, could lead the central bank to suspend further interest rate hikes. However, Jerome Powell, chairman of the Fed, stated in a recent conference that, although inflation is moderating, it remains too high. Therefore, central bankers are prepared to tighten further if necessary.

Jim Baird, chief investment officer at Plante Moran Financial Advisors, emphasized that in the face of clear signs of an economic slowdown, signals of further monetary policy easing could emerge. However, this would require a more pronounced slowdown compared to the Fed’s current forecasts.

For those dealing with high inflation, a solution could be to apply for a personal loan to reduce debt at a lower interest rate, thereby easing monthly payments.