The US inflation rate continued its downward trend in July 2024, with the Consumer Price Index (CPI) falling to 2.9% year-over-year, down from 3% in June. This marks the lowest inflation rate since March 2021 and has intensified speculation about potential interest rate cuts by the Federal Reserve at its next meeting in September.The core inflation rate, which excludes volatile food and energy prices, also eased to 3.2% year-over-year, down from 3.3% in June. The Labor Department reported that consumer prices rose just 0.2% from June to July, with nearly all of the increase attributed to higher rental prices and housing costs.This cooling inflation has provided relief to American consumers and bolstered the case for the Federal Reserve to consider cutting interest rates. However, opinions are divided on the magnitude of potential rate cuts. While most analysts expect a 25 basis point cut in September, some argue for a more aggressive 50 basis point reduction.Federal Reserve Chair Jerome Powell is expected to provide more clarity on the central bank’s stance at the annual Jackson Hole symposium on August 22-24. The Fed’s long-term goal remains a 2% annual inflation rate.As the Fed weighs its decision, it is also paying close attention to the labor market and other economic indicators. Upcoming reports on retail sales, jobless claims, and GDP figures will be closely watched for additional insights into the economy’s health.Financial markets have responded positively to the inflation data, with major stock indices showing gains. The S&P 500 extended its winning streak to five days, moving closer to its all-time high from July.While the White House celebrated the report as a sign of economic progress, some analysts caution against expecting immediate or aggressive rate cuts, warning that the market may be getting ahead of itself. The Fed’s decision in September will likely depend on a careful analysis of all available economic data and its potential impact on long-term inflation trends.
Key points
- US inflation rate fell to 2.
- Federal Reserve is widely expected to cut interest rates in September, with debate over the size of the cut.
- Financial markets responded positively, with major stock indices showing gains.
- Upcoming economic reports will be crucial for the Fed’s decision-making process.
9% in July 2024, the lowest since March 2021.
Contradictions👾While most analysts expect a 25 basis point rate cut in September, some argue for a more aggressive 50 basis point reduction, showing a lack of consensus on the exact magnitude of the potential rate cut.
