The inflation rate in the United States fell to 2.9% in July, marking the lowest level since March 2021, according to a report from the Labor Department. This decrease in inflation is largely in line with expectations and continues the overall trend of falling inflation, potentially paving the way for the Federal Reserve to begin lowering interest rates at its next meeting in September.
The monthly increase of 0.2% was primarily driven by higher rental costs and housing prices, which contributed 90% of the overall rise in prices for the month. However, these costs have been slow to recede from the elevated levels seen during the pandemic. The 0.4% monthly rise was down from the 0.6% gain at the start of the year.
The annual increase in the overall index was the lowest since March 2021, while the core index, which excludes food and energy costs, was the lowest since April 2021, coming in at 3.2%. The Consumer Price Index (CPI) has steadily fallen from its peak of 9.1% in June 2022 and is nearing the 2% target set by the Federal Reserve.
James Ragan, director of wealth management research at D.A. Davidson, told U.S. News, “The inflation data is good enough, we’re getting closer to the 2% target and now they can focus more on the economy and normalizing rates.”
The Federal Reserve is expected to discuss the role of interest rates in curbing inflation during the pandemic period at its annual August research symposium next week in Jackson Hole, Wyoming. The latest inflation data is likely to influence the Fed’s decision on whether to cut interest rates at its September meeting.
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