Inflation cooled slightly last month even as consumers stepped up spending

WASHINGTON (AP) — Inflation eased slightly in August, despite consumers increasing their spending. Even so, price increases remained high and continue to pose challenges for many as the midterm elections approach. Consumer prices increased 3.4% year-over-year in August, lower than the 3.7% forecast by economists. On a monthly basis, prices climbed 0.3%, up from 0.1% in July.

Excluding energy and food, inflation rose 3% in August compared to a year ago, and just 0.2% from July to August. Core prices, excluding volatile energy and food, also increased only 0.2% from July to August. Despite the slight easing, inflation remains above the Federal Reserve's 2% target, indicating it is unlikely to decrease back to target anytime soon.

The Federal Reserve raised interest rates two weeks ago for the first time in three years to tackle inflation, with most economists expecting additional hikes this year. High prices have burdened the U.S. economy, even as growth remains solid and unemployment is low. While Americans' wages are rising, they are not growing as quickly as prices, making it difficult for many to afford rising costs for gas, groceries, and other essentials.

Nevertheless, consumer spending increased by 0.9% from July to August. This robust spending could potentially boost economic growth. The government reported that the economy grew at a 2.2% annual rate in the July-September quarter, with analysts predicting a 3% growth rate for the current quarter. An earlier report showed July's inflation at 3.7%, but the government revised it downward to 3.4% as part of an update in measuring price changes across various categories, including computer software and legal services.

For instance, the government reduced the weight given to computer accessories due to their high prices driven by artificial intelligence developments.