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Prices Are Still Going Up, But Not As Dramatically As Prior Months

AILSA CHANG, HOST:

The price of things like gasoline and groceries keeps going up faster than most Americans are used to, but prices are not rising as fast as they were earlier in the summer. NPR's Scott Horsley joins us now with details on the consumer price index, which came out this morning.

Hey, Scott.

SCOTT HORSLEY, BYLINE: Good afternoon.

CHANG: Good afternoon. All right, so prices are still rising, but the rising is slowing down - is that right?

HORSLEY: (Laughter).

CHANG: Is this good or not so good? I mean, like, just what is this inflation measure telling us?

HORSLEY: Well, do you want the good news or the bad news?

CHANG: I want it all.

HORSLEY: The bad news is it's still costing more to put gas in the car and food in the fridge. Gasoline prices are up almost 43% over the last year. Beef prices, which we talked about a little bit yesterday, are up more than 12%. Overall inflation in August was 5.3%, though. And while that's high, it's not quite as high as in June and July. Economist Joe Brusuelas of RSM says the rising price for things like food and fuel was partially offset by falling prices elsewhere.

JOE BRUSUELAS: What we see in the August inflation data is a case of what goes up often comes down.

HORSLEY: Used cars, for example, which were a big driver of inflation earlier in the year, got a little bit cheaper in August. And airline tickets got quite a bit cheaper.

CHANG: All right. So does this mean that the wave of inflation that we saw during the pandemic has actually peaked?

HORSLEY: It looks as though we may have seen the crest of the inflationary wave. Both the Federal Reserve and the Biden administration have said repeatedly they thought these spikes in inflation would be temporary, or transitory to use the central bank's term. And today's report lends some support to that. If you look at the monthly price hikes, they were smaller in August than July, smaller in July than June. So there is some sign of cooling off. That said, inflation is still pretty high, and Kathy Bostjancic of Oxford Economics says the cooling off period looks as though it might take a while.

KATHY BOSTJANCIC: Our view is that this is going to be transitory, but the transitory is going to be longer than what most people thought. And it'll take time.

HORSLEY: And a lot of people do seem to be bracing for an extended period of higher inflation. The Federal Reserve Bank of New York came out with a survey this week showing, on average, consumers expect inflation a year from now will still be 5.2% - so just barely lower than it is right now - and three years from now, consumers think inflation will still be running around 4%. One thing to keep in mind, Ailsa, even when inflation does settle down, it doesn't necessarily mean prices go back to their pre-pandemic levels. Some things might just level off at a new, higher price.

CHANG: Bummer. OK. So what do you think today's inflation report says about where we are in general after a year and a half of this pandemic?

HORSLEY: You know, there are a lot of mixed signals here. Prices are high, but they don't appear to be spiraling out of control. Inflation appears to be cooling off but very slowly. Even the falling prices are a mixed bag. Some are coming back to Earth for what we might call good reasons, like used cars, for example. There was a severe shortage, and those kinks are getting worked out. But the drop in the price of airline tickets and hotel rooms is less solid. That's caused by the surge in coronavirus cases, which is making people more frightened to travel. And Julia Coronado of MacroPolicy Perspectives says that's not something you want to see.

JULIA CORONADO: Overall, obviously, inflation came in below expectations, which is some welcome relief, but the details still point to a very disrupted global economy and one that's still pretty tied to the pandemic.

HORSLEY: A lot of people were hoping for some clearer economic signals this fall, but unfortunately the rise of the delta variant has just stirred up a lot of storm clouds in the crystal ball.

CHANG: That is NPR's Scott Horsley.

Thank you, Scott.

HORSLEY: Good to be with you.

(SOUNDBITE OF CALEXICO SONG, "WASH") Transcript provided by NPR, Copyright NPR.