- US inflation unexpectedly falls to 2.9 percent
In the U.S., inflation unexpectedly eased in July. Consumer prices rose 2.9 percent year-over-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 (Fed) as it provides a better gauge of general price trends.
U.S. President Joe Biden hailed the progress. "Inflation has fallen below three percent, and core inflation has dropped to its lowest level since April 2021," Biden said in a written statement. "We've made real progress, but we need to do more to lower costs for hardworking Americans."
The Fed is on track to ease its 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 a 2 percent inflation rate. Along with the easing inflation, weaker labor market and economic data suggest 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 decline in the consumer price increase to its lowest since March 2021 at 2.9% year-over-year might indicate a potential relief for consumers facing inflation. Despite this, the Federal Reserve closely monitors the core inflation rate, which excluding energy and food, remained at 3.2% in July.
