In July, inflation increased as projected, primarily due to elevated housing-related expenses, as per a Labor Department report released on Wednesday. This development is expected to maintain the possibility of an interest rate reduction in September.
The consumer price index, which gauges the prices of various goods and services, witnessed a 0.2% uptick during the month, leading to a 2.9% annual inflation rate. Economists surveyed by Dow Jones had anticipated figures of 0.2% and 3%, respectively.
Excluding volatile food and energy prices, the core CPI also showed a 0.2% monthly increase and a 3.2% yearly rate, aligning with predictions.
According to the Bureau of Labor Statistics report, the annual inflation rate is the lowest recorded since March 2021, with the core rate hitting its lowest mark since April 2021. In June, headline inflation stood at 3%.
The notable 0.4% surge in housing costs accounted for 90% of the overall inflation rise. Concurrently, food prices rose by 0.2%, while energy costs remained stable.
Despite subdued food inflation for the month, certain categories experienced substantial increases, particularly eggs, which saw a 5.5% hike. On the other hand, cereals, bakery items, dairy, and related products recorded declines.
Recent inflation metrics have been gradually converging toward the central bank’s 2% target. Another report from the Labor Department on Tuesday indicated a modest 0.1% increase in producer prices during July, equating to a 2.2% rise year over year.
Federal Reserve officials have hinted at a readiness to implement easing measures. However, they have refrained from committing to a specific timeline or speculating about the pace of potential rate cuts. Presently, futures market indicators suggest a slightly higher probability of a quarter-point decrease during the Fed’s upcoming meeting on Sept. 17-18 and at least a full percentage point reduction by the culmination of 2024.
