U.S. inflation rose 2.9% year-on-year last month, slightly weaker than expected, raising the possibility that the Federal Reserve will finally start cutting interest rates next month.
According to the Bureau of Labor Statistics, the consumer price index rose 0.2% from the previous month in July, just below the 3% year-on-year increase that economists had expected, and in line with expectations.
The latest results confirm a more positive trend that has taken hold in recent months, including a 3 percent increase in June, after a shaky start to the year that saw an unexpectedly sharp price rise.
So-called core prices, which exclude volatile food and energy prices, rose 3.2% year-on-year, as expected (slightly down from the 3.3% increase in June), and 0.2% month-on-month.
For months, subsiding inflation has gradually provided relief to American consumers who were hit by explosive increases in the prices of food, gasoline, rent and other basic goods three years ago.
Inflation peaked at 9.1% two years ago, the highest level in 40 years.
Inflation has played a central role in the presidential election, with former President Donald Trump blaming the Biden administration’s energy policies for soaring prices.
Vice President Kamala Harris said Saturday that she would soon release a new proposal to “cut costs and strengthen our entire economy.”
Food prices had been expected to remain roughly flat between June and July, according to UBS economists.
Food prices have risen just 1.1% over the past year. Still, food costs have risen about 21% over the past three years, putting a strain on many household budgets.
Federal Reserve Chairman Jerome Powell said the central bank wants more evidence of slowing inflation before it starts cutting its key interest rate.
Economists widely expect the Fed’s first rate cut to come in mid-September.
When central banks cut their base interest rates, they tend to lower borrowing costs for consumers and businesses over time.
Mortgage rates are already falling in anticipation of the Fed’s first rate cut.
With post wire
