US inflation hits 3-year low as Fed prepares rate cuts
Inflation in the US experienced a significant decrease last month, reaching its lowest point since February 2021. This comes as the Federal Reserve is considering a reduction in interest rates, marking the first such move since the onset of the pandemic. The consumer price index (CPI) saw an annual increase of 2.5% in August, down from July's 2.9%, and below economists' forecast of 2.6%.
Monthly CPI and core CPI figures
On a monthly basis, the US CPI rose by 0.2% in August, mirroring its July performance. The core CPI, which excludes fluctuating food and energy costs, saw an unexpected increase of 0.3% last month. This figure is closely watched by those responsible for guiding the US economy, due to its exclusion of volatile components.
US economy faces challenges amid falling inflation
Despite the decline in inflation, many US citizens continue to struggle with high costs. This issue has become a central topic in the presidential election campaign as voters express concerns about their cost of living. In spring 2022, the Federal Reserve reversed its stance on inflation being a temporary effect of COVID-19 disruptions, and initiated a series of hikes that eventually raised interest rates from near zero to their highest point in two decades.
Federal Reserve's strategy and future plans
Following the Federal Reserve's rate hikes, the consumer price index (CPI) reached a peak of 9.1% in June 2022, its highest in a generation. Since then, inflation has significantly decreased but has occasionally remained high as officials aim to reach their medium-term target of approximately 2%. Now, with possible signs of an economic slowdown including in the labor market, the central bank is preparing to start reducing rates again.
