US inflation unexpectedly weakened
In the U.S., inflation unexpectedly eased in July. Consumer prices rose 2.9% year-over-year, the lowest since March 2021, according to the U.S. Labor Department on Wednesday. Economists had expected the rate to remain unchanged at 3.0%. On a monthly basis, prices rose 0.2%, in line with economist forecasts.
The core inflation rate, excluding energy and food, fell to 3.2% from 3.3% in June, as expected by economists. On a monthly basis, core consumer prices rose 0.2%, also in line with expectations. The core rate is closely watched by the Federal Reserve (Fed) as it provides a better gauge of the general price trend.
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 a 2% inflation rate. Along with the easing inflation, softer labor market and economic data point to 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 current rate of inflation, as reported by the U.S. Labor Department, is lower than expected, at 2.9% year-over-year. Due to this unexpected ease and other economic factors, the Fed is considering a potential rate cut.
