As the final inflation data before the FOMC decision, some have argued that this print matters most as an excuse to stay in 'emergency mode' - perhaps they are right. Consumer Prices dropped 0.1% (as expected) in August - this is the first 'deflation' since January - great news for consumers. Gasoline and airline tickets saw the biggest drops dragging down YoY CPI but The Fed will shrug its "transitory" shoulders but ex-food-and-energy did miss expectations, rising 1.8% YoY (against 1.9% exp). Notably food prices rose 0.2% in August, driven by a surge in egg prices. So WWJYD? Chart: Bloomberg The index for all items less food and energy increased 0.1 percent in August, the same increase as in July. The index for shelter rose, as did the indexes for apparel, tobacco, and alcoholic beverages. However the index for airline fares declined sharply, and the indexes for household furnishings and operations, recreation, and used cars and trucks also decreased in August, with the indexes for new vehicles and medical care unchanged. Full Breakdown... The gasoline index declined sharply in August and was the main cause of the seasonally adjusted all items decrease. Other energy indexes were mixed, with the fuel oil index continuing to decline but the indexes for electricity and natural gas increasing in August. The food index rose 0.2 percent in August, with the indexes for eggs and for fruits and vegetables rising notably And while energy was the culprit for the headline deflation with energy prices sliding 2.0% in August, here is some more details on where the BLS does see inflation: The index for all items less food and energy increased 0.1 percent in August, as it did in July. The shelter index was the main source of the increase; it rose 0.2 percent in August following a 0.4 percent increase in July. The rent index rose 0.3 percent in August, the same increase as in July, while the index for owners' equivalent rent increased 0.2 percent. The index for lodging away from home, however, turned down in August, falling 0.6 percent after a 2.5 percent increase the prior month. The apparel index increased 0.3 percent in August, the same increase as last month. The tobacco index also rose in August, increasing 0.5 percent, and the index for alcoholic beverages advanced 0.1 percent. The medical care index was unchanged in August, with the indexes for hospital services and prescription drugs rising but the indexes for physicians' services and nonprescription drugs declining. The new vehicles index was unchanged in August, as was the index for personal care. Several indexes declined in August. The index for airline fares fell 3.1 percent after decreasing 5.6 percent in July. The index for used cars and trucks decreased 0.4 percent, its fourth decline in a row. The index for household furnishings and operations declined 0.3 percent, and the recreation index fell 0.1 percent. The index for all items less food and energy has risen 1.8 percent over the past 12 months; the 12-month change has been 1.8 percent in five of the last 6 months. The indexes for shelter, medical care, new vehicles, recreation, and tobacco are among the indexes that have increased over the past year. In contrast, the indexes for airline fares, apparel, used cars and trucks, and household furnishings and operations have all declined over the last 12 months. Finally, while the Fed now has to decide if it will hike rates with the first headline deflation in 7 months, here is the biggest threat for the Fed - imported deflation, which as we noted last week in our post on tumbling import prices, is sending a recession-level deflation impulse and is the reason why Goldman is saying far from hiking, the Fed should consider easing at this point.