US inflation hits 3-0.25/XNUMX-year low, market confident Fed will cut interest rates by XNUMX%

US inflation rose 0.2%, the lowest in 3 0.25/XNUMX years, as expected, market confident the Fed will cut interest rates by XNUMX%

September 11, 2567, CNBC reported that US inflation eased in August to its lowest level since February 2564. Although overall inflation fell, core inflation was higher than expected, prompting speculation that the Federal Reserve (Fed) could cut interest rates by 0.25%.

The Labor Department reported that the Consumer Price Index (CPI) rose 0.2% in August, in line with economists in a Dow Jones poll forecast. On a year-on-year basis, the CPI fell 2.5% in August from 2.9% in August, below expectations of a 2.6% increase and the lowest level in 3 XNUMX/XNUMX years.

On the core CPI side, which excludes food and energy prices, rose 0.3%, above expectations of a 0.2% increase. On a year-on-year basis, the core CPI was flat at 3.2%, in line with expectations.

The rise in the core CPI means the Fed is likely to be more cautious about inflation, making it less likely that the Fed will cut rates significantly at next week's meeting.

Ms. Seema Shah, Global Chief Strategist, Principal Asset Management He said that this was not the inflation report the market had been expecting, as core inflation was higher than expected, making it unlikely that the Fed would cut rates by 0.50%.

Shah noted that while the report will not stop the Fed from easing policy next week, inflation-wary policymakers are likely to use the latest inflation report as an indicator that the final push to address inflation needs to be cautious, making it more likely that the Fed will cut rates by 0.25 percentage point.

Even as inflation continues to decline, housing prices remain a problem, with the housing price index, which accounts for about a third of the CPI, rising 1% in August, pushing the core CPI up. On a year-on-year basis, the housing index rose 3%.

Food prices rose 0.1% in August, while energy prices fell 0.8%.

In addition, used car prices fell by 1%, medical and nursing care costs fell by 0.1%, and clothing prices rose by 0.3%. Egg prices rose significantly by 4.8%.

Real earnings continued to grow in August, with hourly earnings increasing by an average of 0.2% and year-on-year, inflation-adjusted hourly earnings increasing by 1.3%.

The Fed has been focused on the slowing labor market, which has fallen to about 50% of its five-month level since April, and now sees preventing a broader economic slowdown as just as important as continuing to fight inflation.

refer : cnbc.com

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