U.S. consumer prices unexpectedly fell in August as gasoline prices resumed their decline and a strong dollar curbed the cost of other goods, pointing to tame inflation that complicates the Federal Reserve's decision whether to hike interest rates.
The U.S. Labor Department said on Wednesday its Consumer Price Index slipped 0.1% last month, the first decline since January, after edging up 0.1% in July. In the 12 months through August, the CPI rose 0.2% after a similar gain in July.
Signs of a disinflationary trend reasserting itself are in stark contrast with a rapidly tightening labour market and highlight the dilemma Fed officials face as they contemplate raising interest rates for the first time in nearly a decade.
The U.S. central bank's policy-setting committee was due to start a two-day meeting later on Wednesday. While solid data on consumer spending, housing and employment have been supportive of a rate hike, that has been undermined by recent global financial markets turmoil.
Sluggish wage gains and a strong dollar have contributed to keeping inflation below the Fed's 2% target.
Economists polled by Reuters had forecast the CPI unchanged in August and rising 0.2% from a year ago.
The so-called core CPI, which strips out food and energy costs, ticked up 0.1% last month after a similar gain in July. The muted gains in the core CPI reflect the dollar's impact on the cost of imported goods.
