Slight Rise in U.S. Consumer Prices Sparks Mixed Reactions

U.S. consumer prices edged up in August, influenced by higher rents and some service costs. Despite this, the core inflation figure indicated a significant moderation, leading analysts to predict a smaller, quarter-point interest rate cut by the Federal Reserve. The CPI has moved closer to the central bank's targets, with year-over-year growth at its lowest since February 2021.

In August, U.S. consumer prices saw a slight uptick, driven by increased rents and costs for certain services, potentially influencing the Federal Reserve's upcoming interest rate decision. The inflation data, released by the Labor Department, shows mixed signals for the economy.

Financial markets have reacted by boosting the likelihood of a 25 basis points rate cut next week, while reducing the chances of a 50 basis points cut. According to Nationwide's senior economist Ben Ayers, ongoing pressures from housing and service sectors contributed to the inflation bump.

The consumer price index rose 0.2% for the month, with energy prices experiencing a decline and food prices showing minimal change. The year-over-year CPI growth was reported at 2.5%, the smallest increase since February 2021. This slowdown allows policymakers to focus more on labor market trends, which also indicate moderation in hiring and a slight drop in the unemployment rate.

(With inputs from agencies.)