 "US consumer inflation eases more than expected: Will a big interest rate cut follow soon?")
United States consumer inflation eased more than expected in August, according to government data published Wednesday (September 11). The consumer price index (CPI) slowed to 2.5 percent in August from a year ago, down from 2.9 percent in July and the lowest annual figure since February 2021, the US Labour Department said.
These numbers are one of the last big data releases before the US Federal Reserve meets next week to make the first in a series of interest rate cuts.
This weaker-than-expected reading means that the case for the US Fed to make cut rates faster has been bolstered. Bringing down interest rates faster would mean that the US Federal Open Market Committee (FOMC) would need to make bigger cuts.
However, a big interest rate cut may still elude the US. This is because underlying inflation, better known as core inflation, has remained sticky. Core inflation excludes volatile prices to gauge the underlying trend of prices.
Removing the volatile food and energy components, the CPI climbed 0.3 per cent in August after rising 0.2 per cent in July. In the 12 months through August, the so-called core CPI increased 3.2 per cent. That followed a 3.2 per cent gain in July.
Some economists cautioned that lingering stickiness in core inflation argued against a half-point rate cut next Wednesday (September 18).
Still, the fact of the matter is that the US inflation has slowed considerably from its peak at 9.1 per cent in mid-2022, the highest rate in four decades. That high rate of price rise was driven by a surge in prices of food, gas, rent and other necessities.
Impact Shorts
More ShortsAdditionally, Fed officials have indicated that they are increasingly confident that inflation is falling back to their desired range of around 2 per cent. The policymakers are now shifting their focus to supporting the labour market and larger economy.
With inputs from agencies
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