WASHINGTON, 14th August, 2024 (WAM) -- Year-over-year inflation in the U.S. reached its lowest level in more than three years in July, the latest sign that the worst price spike in four decades is fading and setting up the Federal Reserve for an interest rate cut in September.
Associated Press reported that Wednesday's report from the Labour Department showed consumer prices rose just 0.2 percent from June to July after dropping slightly the previous month for the first time in four years. Measured from a year earlier, prices rose 2.9 percent, down from 3 percent in June. It is the mildest year-over-year inflation figure since March 2021.
The government said nearly all the increase last month reflected higher rental prices and housing costs, a trend that, according to real-time data, is easing.
For months, cooling inflation has provided gradual relief to America’s consumers, who were stung by the price surges that erupted three years ago, particularly for food, gas, rent and other necessities. Inflation peaked two years ago at 9.1 percent, the highest level in four decades.
Excluding the volatile food and energy categories, so-called core prices climbed 0.2 percent from June to July, after a 0.1 percent increase the previous month. Compared to a year ago, core inflation rose 3.2 percent, down from 3.3 percent in June, the lowest since April 2021. Core prices are closely watched by economists because it typically provides a better read of where inflation is headed.
Fed Chair Jerome Powell has said he is seeking additional evidence of slowing inflation before the Fed begins cutting its key interest rate. Economists widely expect the Fed’s first rate cut to occur in mid-September.
When the central bank lowers its benchmark rate, over time it tends to reduce the cost of borrowing for consumers and businesses. Mortgage rates have already declined in anticipation of the Fed’s first rate reduction.