The Labor Department said Wednesday that consumer prices rose 0.2% in July after remaining flat or falling for two straight months.
The Consumer Price Index (CPI) also grew at a slower clip in July from a year earlier, to 2.9%, down from 3% in June and falling below 3% for the first time since March 2021.
The latest inflation reading comes as the Federal Reserve prepares to make a much-needed interest rate cut ahead of the upcoming election and at a time when economic uncertainty is growing as unemployment has begun to rise.
Borrowing costs have remained at their highest levels in 23 years since July last year, when the Federal Open Market Committee (FOMC) raised interest rates to the 5.25-5.5 percent range.
The committee has voted to keep rates in the current range at each of its subsequent meetings, and expectations that it would vote to ease monetary policy as early as 2024 were dashed by rising inflation this spring.
But concerns about a potential recession have resurfaced as the unemployment rate has risen and the actual number of jobs added to the economy has also been revised down.
The unemployment rate has remained below 4% for the longest time since the 1960s, but last month the rate jumped to 4.3% from 4.1% in June. That’s the highest unemployment rate since October 2021.
A majority of interest rate traders now expect not one but two rate cuts when the FOMC meets again in September. CME FedWatch Rate predictors.
The September meeting will be the last before the general election, and the timing will expose Fed Chairman Jerome Powell to criticism from both Democrats and Republicans, despite his repeated insistence that the central bank is an independent institution that makes decisions based on economic data, not politics.
Former President Trump appointed Powell in 2017 but almost immediately began clashing with the lifelong Republican as the Fed began raising interest rates during his first year in office.
President Trump recently said he would allow Powell to complete his term, which ends in 2026, but he has warned the Fed against cutting interest rates before the election, which could stimulate the economy and send stock prices soaring.
“This is something they know they shouldn’t be doing,” Trump said in an interview with Bloomberg.
Meanwhile, some Democrats have called on the central bank to cut interest rates, saying they are exacerbating soaring home prices, soaring consumer loan costs and the jobs crisis.
