US Inflation Falls to Lowest Since Early 2021, but Consumer Prices Remain High

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US Inflation Falls to Lowest Since Early 2021, But Consumer Prices Remain High
People walk through the Westfield World Trade Center shopping mall at the World Trade Center complex, which is located on the land where the Twin Towers once stood before they were destroyed in the attacks on September 11, 2001, on September 09, 2024, in New York City. New York City and the nation are preparing to mark the 23rd anniversary of the attacks, which killed nearly 3000 people and injured thousands more. Spencer Platt/Getty Images

This August, CPI or Consumer Price Index had an increase of 0.2%, which means goods and services across the US are still costly to Americans.

According to CNBC, this data was in line with Dow Jones, following hourly earnings increasing this month as well. While not a good indication, the report also stated that at least the inflation rate did not have the same trend as it is currently 2.5% down. The inflation level has never been this low since 2021 and compared to July report, it's a significant 0.4%.

With this new data, traders are expecting the Federal Reserve to approve an interest rate reduction after their meeting in September 18.

To be clear, besides the CPI increase, they could be setting their concerns for core CPI's 0.3% increase per month as well. CPI core includes volatile price changes of energy and food every month.

Why Fed Rate Cut is Still Necessary Despite Low Inflation?

Inflation, at its current rate, is considered moderate. But it's not the same with housing-related costs. According to Forbes, shelter index increased to 5.2% every year, with food price at 0.1% and energy at 0.8%. Apparel also saw an increase at 0.3%. Those that went down, together with inflation rate, are used vehicle and medical care price.

"This isn't the CPI report the market wanted to see. With core inflation coming in higher than expected..." a global strategist told CNBC.

Besides, the Feds is looking at the rather-slow labor market in the US, especially that jobs were cut to half earlier this year. Preventing a more slowdown in the following months is crucial if they hope to maintain their fight against inflation. Increased hourly earnings cannot help US jobless data as well since consumer prices are still high.

For instance, AP News reported that airline fares are up 3.9% in August. hospital and services are up 5.8% compared to last year and gas price only declining at 0.6% compared to 10.3% a year ago.

Tags
US inflation, Inflation rate, Federal Reserve

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