US Inflation Hits 2.9% in July, Fueling Speculation of September Fed Rate Cut

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 some analysts expect a 25 basis point cut in September, others argue for a more aggressive 50 basis point reduction.Federal Reserve Chair Jerome Powell has indicated that the central bank is seeking additional evidence of slowing inflation before initiating rate cuts. 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. The unemployment rate rose to 4.3% in July, mainly due to an influx of job-seekers. This, along with the inflation data, will be crucial factors in the Fed’s decision-making process in the coming months.Financial markets have responded positively to the inflation data, with major stock indices showing gains. However, some analysts caution against expecting immediate or aggressive rate cuts, warning that the market may be getting ahead of itself.

Key points

• US inflation rate fell to 2.

9% in July 2024, the lowest since March 2021.

• The Federal Reserve is expected to consider rate cuts at its September meeting.
• Opinions are divided on the magnitude of potential rate cuts, ranging from 25 to 50 basis points.
• Financial markets have responded positively to the inflation data.

Contradictions👾While some analysts expect a 25 basis point rate cut in September, others argue for a more aggressive 50 basis point reduction, highlighting the uncertainty surrounding the Fed’s next move.