In August, consumer prices experienced a moderate rise of 0.2%, signaling a continuing trend of easing inflationary pressures. This marks the lowest annual inflation rate since February 2021, according to a report from the U.S. Labor Department. The data comes ahead of a highly anticipated quarter-percentage-point rate cut from the Federal Reserve, expected next week.
The Consumer Price Index (CPI), which tracks the overall cost of goods and services across the U.S. economy, matched the Dow Jones forecast with a 0.2% increase for the month. Over the past year, inflation has declined to 2.5%, down 0.4 percentage points from July, and slightly below the 2.6% estimate from analysts.
However, core CPI, which excludes the more volatile categories of food and energy, edged up by 0.3%, slightly above the 0.2% estimate. Year-over-year, core inflation stands at 3.2%, aligning with predictions.
Despite the overall moderation in inflation, housing-related costs continue to exert upward pressure. The shelter index, which makes up about one-third of the CPI, climbed by 0.5% in August and has surged by 5.2% over the last 12 months. This sector accounted for a significant portion of the increase in the all-items CPI.
Food prices saw a modest rise of just 0.1%, while energy costs fell by 0.8%, providing some relief to consumers. Meanwhile, other notable trends in the report include a 1% drop in used vehicle prices, a 0.1% decrease in medical care services, and a 0.3% uptick in apparel costs.
Following the release of the report, stock market futures experienced a slight decline, while Treasury yields increased. In the federal funds futures market, traders have now priced in an 85% chance of a 25-basis-point interest rate cut by the Federal Reserve’s Federal Open Market Committee, set to conclude its next meeting on September 18.
This inflation report adds weight to expectations of monetary policy easing as the Fed aims to balance economic growth with inflation management. While inflation continues to moderate, challenges in key sectors, particularly housing, suggest the path ahead will require careful navigation.