US inflation slows in August, expectations of rate cut by Federal Reserve increase

(MENAFN) In August, inflation in the United States moderated in line with expectations, with the Consumer Price Index (CPI) rising by 0.2 percent on a monthly basis and 2.5 percent on an annual basis. This annual rate marks a decrease from 2.6 percent in July, reaching its lowest level since early 2021. The core Consumer Price Index, which excludes volatile items like food and energy, increased by 0.3 percent for the month and saw an annual rise of 3.2 percent, surpassing the anticipated 0.2 percent monthly increase. The report from the Labor Department highlights that while prices for various goods and services have risen, the overall annual inflation rate has dropped to its lowest point since February 2021.

In August, food prices experienced a minimal rise of 0.1 percent, while energy costs saw a decline of 0.8 percent. Additionally, used car prices fell by 1 percent, healthcare prices decreased by 0.1 percent, and clothing prices went up by 0.3 percent. These mixed price movements contribute to the broader inflation trend and set the stage for an expected interest rate adjustment by the Federal Reserve. The Federal Reserve is anticipated to reduce interest rates by a quarter percentage point in its upcoming meeting, scheduled for September 17-18.

Market expectations reflect a high probability of this rate cut, with traders in the Federal Reserve funds futures market assigning an 85 percent chance to the Federal Open Market Committee agreeing to lower rates by 25 basis points. This prediction is supported by the CME Group’s FedWatch gauge, underscoring the market’s anticipation of a more accommodative monetary policy to further manage inflationary pressures.

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