U.S. Inflation Slows, Paving Way for Federal Reserve Rate Cut

U.S. consumer prices rose moderately in July, with annual inflation slowing to below 3% for the first time since early 2021. This trend strengthens expectations that the Federal Reserve will cut interest rates in September. The housing sector was the main contributor to the CPI rise.

In July, U.S. consumer prices saw a moderate rise, while annual inflation dipped below 3% for the first time since early 2021, bolstering expectations for an interest rate cut by the Federal Reserve next month.

A report from the Labor Department on Wednesday highlighted a minor increase in producer prices in July, suggesting a downward trend in inflation. This positions the U.S. central bank to shift its focus more towards the labor market amid concerns of a sharp economic slowdown. 'The relay race to Fed cuts is on,' stated Lindsay Rosner, head of multi-sector fixed income at Goldman Sachs Asset Management.

The consumer price index went up by 0.2% last month, in line with economists' forecasts. A 0.4% rise in shelter costs, primarily rents, accounted for nearly 90% of the CPI increase. Food prices grew by 0.2%, while gasoline prices remained unchanged. On a year-on-year basis, the CPI rose by 2.9% through July, marking the first sub-3% reading since March 2021.

(With inputs from agencies.)