(MENAFN- AFP)
US consumer inflation eased more than expected last month, according to government data published Wednesday, bolstering expectations that the federal Reserve will cut interest rates next week.
A rate cut by the independent US central bank would act to boost demand in the world's largest economy. That would give the Democratic party some good economic news to run on going into the final stretch of the 2024 presidential elections.
The consumer price index (CPI) slowed to 2.5 percent in August from a year ago, down from 2.9 percent in July and the lowest annual figure since February 2021, the Labor Department said in a statement.
This was slightly below the median forecast of economists surveyed by Dow Jones Newswires and The Wall Street Journal.
A measure of inflation that strips out volatile food and energy costs remained largely unchanged at an annual rate of 3.2 percent.
The monthly inflation rate picked up by 0.2 percent, in line with expectations.
Alongside the ongoing slowdown in consumer inflation, the Fed's favored inflation measure, known as the personal consumption expenditures price index (PCE), has also eased towards the bank's long-term two-percent target in recent months.
The labor market has also cooled.
Against this backdrop, Fed policymakers have shifted attention from inflation to the unemployment part of the bank's dual mandate, and indicated that rate cuts are on the way.
"The time has come for policy to adjust," Fed chair Jerome Powell said last month.
"The direction of travel is clear, and the timing and pace of rate cuts will depend on incoming data, the evolving outlook, and the balance of risks," he added.
A Fed rate cut next week will thrust the independent US central bank into the middle of the political debate less than two months before November's presidential election, in which the economy remains a top issue for voters.
Policymakers have been clear that the timing of rate cuts will be based on the economic data, not political considerations.
Nevertheless, a September cut could irk the Republican candidate and former US president Donald Trump, who has previously suggested without evidence that Jerome Powell -- whom he first nominated to run the Fed -- was displaying political favoritism toward the Democratic party.
Investors will now turn their attention to the upcoming Fed rate decision, which will be announced on September 18.
Futures traders are certain that the Fed will cut rates next week, but are not yet certain about the size of it, according to data from CME Group.
They assign a probability of around 85 percent that the Fed will cut by a quarter percentage-point, and a 15-percent chance that it will enact a more aggressive half-point cut.
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