- US inflation unexpectedly falls to 2.9 percent
In the U.S., inflation unexpectedly eased in July. Consumer prices rose 2.9 percent year-on-year, the U.S. Labor Department reported on Wednesday. This is the lowest rate since March 2021, down from 3.0 percent in June. Economists had predicted the rate would remain unchanged.
On a monthly basis, prices rose 0.2 percent, in line with economist forecasts.
The core inflation rate, excluding energy and food, fell to 3.2 percent from 3.3 percent in June. This was also in line with economist expectations. On a monthly basis, core consumer prices rose 0.2 percent, as expected. The core rate is closely watched by the Federal Reserve as a better indicator of overall price trends.
The Fed is on track to ease monetary policy. A rate cut in September is widely expected, and a larger 0.50 percentage point cut is no longer ruled out.
The Fed aims for an inflation rate of two percent. Along with the easing inflation, softer labor market and economic data support a rate cut. While the Fed has signaled a rate cut, it has made it dependent on data developments. Concerns about the U.S. economy had previously led to financial market turbulence.
The decrease in the consumer price increase might influence the Federal Reserve's monetary policy decisions. With the consumer price increase at 2.9% year-on-year, it's now closer to the Federal Reserve's target of a 2% inflation rate.
