US inflation hits 2.9% in July, paving way for Fed to finally start cutting rates
US inflation last month rose 2.9% versus a year ago — slightly below expectations in a result that likely paves the way for the Federal Reserve to finally begin cutting interest rates next month.
The Consumer Price Index came in just slightly under the 3% year-over-year gain economists had forecasted for July, and rose 0.2% from a month earlier, which was in line with expectations, according to the Bureau of Labor Statistics.
The latest results confirm a more friendly trend that has taken hold in recent months — including a 3% rise in June — after a volatile start to the year that saw unexpectedly steep price gains.
Excluding volatile food and energy costs, so-called core prices were in line with expectations, rising 3.2% from a year earlier — just below June’s 3.3% increase — and 0.2% from a month ago.
For months, cooling inflation has provided gradual relief to America’s consumers, who were stung by the price spikes that erupted three years ago, particularly for food, gas, rent and other necessities.
Inflation peaked two years ago at 9.1%, the highest level in four decades.
Inflation has taken a central role in the presidential election, with former President Donald Trump blaming the Biden administration’s energy policies for the price spikes.
Vice President Kamala Harris on Saturday said she would soon unveil new proposals to “bring down costs and also strengthen the economy overall.”
Grocery prices were expected to have been largely unchanged from June to July, according to economists at UBS.
Over the past year, food prices are up just 1.1%. Still, food costs have soared roughly 21% in the past three years, squeezing many family budgets.
Fed Chair Jerome Powell has said he is seeking additional evidence of slowing inflation before the Fed begins cutting its key interest rate.
Economists widely expect the Fed’s first rate cut to occur in mid-September.
When the central bank lowers its benchmark rate, over time it tends to reduce the cost of borrowing for consumers and businesses.
Mortgage rates have already declined in anticipation of the Fed’s first rate reduction.
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