The highly anticipated report by the Bureau of Labor Statistics for August showed that consumer prices in the United States had slight growth while the annual inflation rate dropped to its lowest level since 2021.
According to the report, the Consumer Price Index (CPI) increased 0.2% in August compared to the month prior, which is in line with expectations by economists. The annual inflation rate came at 2.5%, down by 0.4% from July. It marks the lowest 12-month inflation rate since February 2021 and sits below an estimated 2.6%.
On the other hand, the core CPI, which excludes prices of food and energy, has been more persistent. It saw a 0.3% increase in August, higher than the 0.2% estimated. The annual core inflation rate met the expectations of 3.2%.
According to experts, a mixed CPI report will likely prompt the Federal Reserve to be more cautious in adjusting its policy. The traders hoped that the Fed might reduce the interest rate by half a percentage point, but experts predict that the latest data will strengthen the case for a quarter percentage point cut.
“This isn’t the CPI report the market wanted to see. With core inflation coming in higher than expected, the Fed’s path to a 50 basis point cut has become more complicated,” Seema Shah, chief global strategist at Principal Asset Management, told CNBC.