August's CPI report shocked the financial markets. It was widely expected to confirm that inflation peaked around June based on the drop in gasoline prices during July and August and mounting evidence that durable goods inflation is moderating.
The problem is that in the nondurable goods category of the CPI, food inflation remains high, offsetting some of the improvement in energy-related prices (table below). While overall goods inflation does seem to have peaked, the same cannot be said for services. Inflationary pressure may be mounting in medical services, and is continuing to push rents higher.