US annual consumer price increase slows to below 3pc as inflation ebbs

FE Team | Published: August 15, 2024 22:36:39

WASHINGTON, Aug 15 (Reuters): US consumer prices rose moderately in July and the annual increase in inflation slowed to below 3 per cent for the first time in nearly 3-1/2 years, opening the door wider for the Federal Reserve to cut interest rates next month.
The report from the Labor Department on Wednesday marked the third straight month of tame consumer price readings and added to a mild rise in producer prices last month in suggesting that inflation was firmly back on a downward trend. Ebbing inflation aligns with anecdotes from businesses that consumers are pushing back against high prices, through bargain hunting, cutting back on purchases and trading down to lower-priced substitutes.
But with rents pushing higher last month and inflation still above its 2 per cent target, economists said it was unlikely the US central bank would kick off its anticipated easing cycle with a 50-basis-point rate cut, absent a deterioration in the labor market. A jump in the unemployment rate to near a three-year high of 4.3 per cent in July put a half-per centage-point rate reduction on the table.
"This report shows continued progress towards the Fed's inflation goals," said Scott Anderson, chief economist at BMO Capital Markets. "Nothing in it would keep the Fed from cutting in September, but market hopes for a bigger cut still seem like a long shot."
The consumer price index rebounded 0.2 per cent last month after falling 0.1 per cent in June, the Labor Department's Bureau of Labor Statistics reported. The rise was in line with economists' expectations. Before rounding up, the CPI increased 0.155 per cent.
A 0.4 per cent increase in the cost of shelter accounted for nearly 90 per cent of the rise in the CPI. Shelter costs, which include rents, increased 0.2 per cent in June. Food prices gained 0.2 per cent, matching June's rise. Higher rent and food prices could continue to weigh on the minds of voters ahead of the Nov. 5 US presidential election.
Grocery store prices edged up 0.1 per cent for a second straight month. Egg prices jumped 5.5 per cent. Meat, fish, fruits and vegetables, and nonalcoholic beverages cost more. But there were price declines for other food items consumed at home as well as cereals, bakery and dairy products.
Gasoline prices were unchanged after falling for two straight months. The cost of electricity increased marginally, while natural gas prices dropped 0.7 per cent.