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The U.S. inflation rate has dropped below 3% for the first time since March 2021, signaling a significant milestone in the nation’s economic recovery. According to the Bureau of Labor Statistics (BLS), the Consumer Price Index (CPI) rose 2.9% over the 12 months ending in July, down from June’s 3% annual gain. This decline reflects the slowest inflation pace in over three years, offering the Federal Reserve potential room to reduce interest rates as soon as next month.
- U.S. inflation slowed to 2.9% in July 2024, the lowest rate since March 2021.
- The Consumer Price Index (CPI-U) increased by 0.2% on a monthly basis, recovering from a 0.1% decline in June.
- Core inflation, excluding food and energy, also rose 0.2% in July.
- Shelter costs, including rent, drove nearly 90% of the overall CPI increase, with the shelter index up 5.1% over the past year.
- Food prices increased by 0.2% in July, with a notable 0.7% rise in the index for meats, poultry, fish, and eggs.
- Energy prices remained stable, with no change in the overall energy index for July.
- The drop in inflation could influence the Federal Reserve’s decision on interest rates, potentially leading to a rate cut in September.
Monthly inflation figures showed a modest increase of 0.2% in July, aligning with economists’ expectations and rebounding from a 0.1% decrease in June. The core CPI, which excludes the volatile categories of food and energy, also increased by 0.2% from the previous month, with an annual rise of 3.2% .
The slowdown in inflation is particularly notable in the context of housing costs, which have been a major driver of price increases in recent years. The shelter index, which comprises more than one-third of the overall CPI, saw a 0.4% rise in July and accounted for nearly 90% of the total monthly CPI increase. However, economists believe this upward pressure on inflation may soon ease as housing price measurements start to better reflect the slowing rental market .
This inflation report has led to a positive reaction in the financial markets, with the S&P 500, Dow Jones Industrial Average, and Nasdaq Composite all closing higher on the news. Investors are now closely watching the Federal Reserve’s next move, as the drop in inflation increases the likelihood of a rate cut in September. The Fed’s decision will be critical in determining the pace of economic recovery and job growth in the coming months .
With inflation finally appearing to be under control, the focus now shifts to how the Federal Reserve will balance its dual mandate of promoting maximum employment and maintaining stable prices. The coming months will be pivotal as policymakers weigh the need for continued economic stimulus against the risks of re-igniting inflationary pressures.
https://www.bls.gov/news.release/cpi.nr0.htm
U.S. Inflation Slows to 2.9% in July, Hitting a Three-Year Low
The U.S. inflation rate has fallen to its lowest level in more than three years, according to the latest data from the U.S. Bureau of Labor Statistics (BLS). The Consumer Price Index for All Urban Consumers (CPI-U) rose 2.9% over the past 12 months, a decrease from June’s 3% annual increase. This marks the smallest year-over-year rise in inflation since March 2021.
On a monthly basis, the CPI-U increased by 0.2% in July, recovering from a 0.1% decline in June. The index for all items excluding food and energy, often referred to as core inflation, also rose 0.2% for the month, continuing its gradual upward trend .
The shelter index was the primary contributor to the monthly increase in inflation, rising by 0.4% in July and accounting for nearly 90% of the overall CPI increase. Shelter costs, which include rent and owners’ equivalent rent, have been a significant factor in inflation over the past year, with the shelter index up 5.1% over the past 12 months. This component alone has contributed to over 70% of the total increase in the CPI excluding food and energy .
Food prices saw a modest increase of 0.2% in July, mirroring the rise seen in June. Notably, the index for food at home edged up by 0.1%, while the cost of food away from home also increased by 0.2%. Among grocery items, the index for meats, poultry, fish, and eggs showed the most significant monthly increase at 0.7%, driven largely by a 5.5% rise in egg prices .
Energy prices remained stable in July, with no change in the overall energy index following a 2% decline in June. However, electricity costs ticked up slightly by 0.1%, while natural gas prices fell by 0.7% .
This slowdown in inflation has caught the attention of economists and investors alike, as it may influence the Federal Reserve’s monetary policy decisions in the coming months. With inflation seemingly under control, there is increased speculation that the Fed might consider lowering interest rates in September to support continued economic growth.
The next release of CPI data, scheduled for September 11, 2024, will be closely watched as it could provide further insight into the trajectory of inflation and the potential for rate adjustments.