U.S. inflation continued to slow to 2.9% in July, the lowest level since March 2021

2024-08-14 13:59:32

The Consumer Price Index (CPI) released on Wednesday showed that U.S. inflation continued to slow to 2.9% year-on-year in July, compared with 3% in the previous month, the lowest level since March 2021 and slightly below expectations on August 14. On the other hand, according to the Labor Department, prices rose 0.2% in a month after falling 0.1% in June.

Excluding energy and food prices, which are inherently more volatile, so-called core inflation for the year was 3.2%, in line with expectations and slightly down from 3.3% in the previous month. Commodity prices were the main cause of the decline, especially new and used car prices, followed by clothing and fuel prices.

On the other hand, prices of services excluding energy, which have been the main driver of inflation over the past month, rose again in a month, by 0.3% compared to 0.1% in June, especially housing and transport services.

Fed refuses to cut rates

Still, overall the trend should confirm the data released so far and the sense that inflation is gradually returning to the Federal Reserve’s 2% long-term goal. The Fed has so far resisted cutting interest rates, arguing that there is not enough data to show a sustainable return to target.

Inflation in the United States peaked as economies around the world reopened in the wake of the Covid-19 pandemic, reaching an annual rate of 9.5% in June 2022. The Federal Reserve resolutely raised interest rates until it cut them to 5.25% and 5.50%, the highest levels since the beginning of the century.

Inflation has since slowed sharply, to around 2.6% in recent months, according to the Fed’s preferred PCE index, but has stabilized in a range of 2.5% to 3% after a rapid decline in the second half of 2023. The Fed’s preferred PCE index has slowed to around 2.6% in recent months, according to the Fed’s preferred PCE index, but has stabilized in a range of 2.5% to 3% since the beginning of the year.

The Fed’s next meeting is scheduled for mid-September, with most analysts expecting the central bank to announce its first rate cut. It will be the last meeting before the U.S. presidential election on November 5.

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