By Jimmy Fatunbi
Inflation continues to loosen its grip on American consumers, with price hikes slowing by the most in three and a half years and all but cementing a quarter-point rate cut from the Federal Reserve when it meets next week.
The Consumer Price Index, a measurement of price changes for a commonly purchased basket of goods and services, briskly retreated from a 2.9% rate in July to 2.5% in August, the lowest since February 2021 and a rate that matches the average seen in 2018, according to Bureau of Labor Statistics data released Wednesday.
On a monthly basis, prices rose 0.2%, unchanged from July.
“The cumulative progress on inflation — evidenced by the CPI now at 2.5% after having peaked at 9% in mid-2022 — has given the Federal Reserve the green light to begin cutting interest rates at next week’s meeting,” Greg McBride, chief financial analyst for Bankrate, said in commentary issued Wednesday. “While further improvement on inflation is both needed and expected to get to the 2% target, emphasis has shifted to the labor market and the full employment side of the Fed’s mandate.”
Economists were expecting the annual rate would slow significantly last month to 2.6% annually, according to FactSet. That’s in part due to favorable year-ago comparisons: Last summer’s gas price spike jolted inflation higher in August 2023.
Falling gas prices helped bring overall inflation lower last month, dropping by 0.6% for the month and 10.3% annually.
Grocery prices held flat for the month, and overall food inflation was up 0.1% in August and 2.1% annually.
Excluding food and energy, which are typically volatile categories, the core CPI gauge rose 0.3% from July, a faster-than-expected increase that held the annual rate at 3.2%.
Economists had projected core would increase 0.2% and hold at 3.2% for the year ended in August.
The cost of owning and renting a home continued to be the leading driver of inflation, the BLS noted in the report. The shelter index rose 0.5% for the month and was the “main factor” in the overall increase. On an annual basis, it’s up 5.2% and accounts for more than 70% of the annual increase in core CPI.
This story is developing and will be updated.
