Inflation in the US reaches 2.9 percent in July, paving the way for Fed to cut interest rates

Inflation in the US rose by 2.9 percent last month compared to a year earlier – slightly below expectations. This result should pave the way for the US Federal Reserve to finally start cutting interest rates next month.

The consumer price index was just below the 3% year-over-year increase economists had forecast for July and rose 0.2% from the previous month, in line with expectations, according to the Bureau of Labor Statistics.

The latest results confirm a more positive trend that has taken hold in recent months – including a 3% increase in June – after a volatile start to the year marked by unexpectedly strong price increases.

Excluding volatile food and energy costs, so-called core prices were in line with expectations, rising 3.2 percent year-on-year – just below the 3.3 percent increase in June – and 0.2 percent month-on-month.

For months, the cooling of inflation has been providing gradual relief to American consumers after they suffered three years ago from price increases, particularly in food, gasoline, rent and other essential goods.

Inflation peaked two years ago at 9.1%, the highest level in four decades.

Inflation played a central role in the presidential election, with former President Donald Trump blaming the Biden administration’s energy policies for the price spikes.

Vice President Kamala Harris said on Saturday that she would soon unveil new proposals to “reduce costs while strengthening the economy overall.”

According to UBS economists, food prices are likely to have remained largely unchanged from June to July.

Last year, food prices rose by just 1.1 percent. However, over the past three years, food costs have risen by around 21 percent, putting a strain on many families’ budgets.

Fed Chairman Jerome Powell said he was looking for additional evidence of a slowdown in inflation before the Fed begins cutting its benchmark interest rate.

Economists generally expect the Fed to make its first interest rate cut in mid-September.

When the central bank lowers its policy rate, this tends to reduce borrowing costs for consumers and businesses over time.

Mortgage rates have already fallen ahead of the Fed’s first rate cut.

With post wires