US Inflation Drops Below 3%
US consumer prices increased slightly in July, with annual inflation slowing to 2.9%, its lowest level in nearly 3.5 years. This raises the likelihood that the Federal Reserve will cut interest rates next month.
The Labor Department’s latest report shows three consecutive months of stable consumer prices and a modest rise in producer prices, suggesting inflation is on a downward trend.
“This report shows continued progress towards the Fed’s inflation goals,” Scott Anderson, a chief economist at BMO Capital Markets, told Reuters.
“Nothing in it would keep the Fed from cutting in September, but market hopes for a bigger cut still seem like a long shot,” Anderson added.
Annual consumer price growth has moderated considerably.Image: Reuters
Despite the decline, higher rents and persistent inflation above the 2% target mean a significant rate cut in September remains uncertain. The consumer price index rose 0.2% in July, driven mainly by a 0.4% increase in shelter costs.
