Nathan Janzen, the senior economist at Royal Bank of Canada (RBC), notes that the U.S. core CPI inflation rose 2.4% year-over-year in August while the headline index increased 1.7% year-over-year.

• “Core prices rose 0.3% month-over-month for a third straight month.
• There is still little if any evidence that US inflation is at risk of coming unhinged on the upside.  Nonetheless, the third straight 0.3% increase in price growth excluding food & energy products marks the longest such stretch since 1995 – and the year-over-year rate at 2.4% matches a cycle high.
• US tariffs on a widening variety of goods imports from China may be filtering through to higher consumer prices, but do not explain all of the increase.  Prices for services ex-energy products also increased 0.3% in each of the last three months.  The US Fed pays more attention to the core PCE deflator, which has held under a 2% rate, but could presumably follow CPI prices higher in the near-term.
• We continue to pencil in another two 25 basis point rate cuts from the Fed this year, the next being next week in September.”