A closely watched report on U.S. inflation showed that annual growth in consumer prices fell in August, according to the latest data from the Bureau of Labor Statistics released Wednesday morning.
The consumer price index (CPI) rose 2.5% in August from a year earlier, a slowdown from the 2.9% annual price increase in July and the slowest annual pace since early 2021. The annual increase was also in line with economists’ expectations.
The index rose 0.2% from the previous month, matching the monthly gain in July and what economists had expected.
On a “core” basis, which strips out the more volatile costs of food and gas, prices rose 0.3% in August from the previous month and 3.2% from a year ago. Core prices rose 0.2% month-over-month and 3.2% year-over-year in July.
Although inflation is easing, it has remained above the Federal Reserve’s 2% annual target. However, recent economic data, including a weakening labor market, point to a near-certain rate cut by the end of the Fed’s next policy meeting on Sept. 18.
“It’s time for policy action,” Fed Chairman Jerome Powell said last month at the Kansas City Fed’s annual economic symposium in Jackson Hole, Wyoming.
The question now is to what extent the Fed will adjust policy when it comes to lowering interest rates.
On Tuesday, markets had priced in a nearly 100 percent chance that the Federal Reserve will cut interest rates by the end of its September meeting. However, immediately following the data release, the odds for a 50 basis point cut versus a 25 basis point cut split 73/27, up from a 56/44 chance placed by traders last week, according to the CME FedWatch Tool.
Alexandra Canal is a Senior Reporter at Yahoo Finance. Follow her on X @allie_canal, LinkedIn, and send her an email at alexandra.canal@yahoofinance.com.
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