U.S. inflation falls to lowest in years

Inflation continued to cool in July, falling to its lowest level in three years. The latest report from the Labor Department showed consumer prices rising only 0.2% from June to July. Prices rose 2.9% in July from a year earlier, down from 3% in June.

This @WSJ chart captures well why the general public has yet to appreciate the fall in the US inflation rate from over 9% two years ago to just under 3%.#economy #inflation #econtwitter pic.twitter.com/jucDpufqMF

— Mohamed A. El-Erian (@elerianm) August 16, 2024

This marks the smallest 12-month increase since March 2021.

US Housing Starts hit a 50-month low in July, down 16% over the past year. Tends to be a leading indicator for the economy, recessionary signals building. pic.twitter.com/DSszADuXwW

— Charlie Bilello (@charliebilello) August 16, 2024

The report indicates the Federal Reserve may have the opportunity to cut interest rates by 25 basis points at its September meeting. “We’re moving in the right direction on inflation, and doing so with some momentum,” noted Jared Bernstein, chair of the Council of Economic Advisers. Nearly the entire increase in July stemmed from higher rental costs and housing prices. Shelter accounted for almost 90% of the monthly rise. Energy prices remained steady after experiencing declines in previous months.

.@POTUS & @VP are making progress fighting inflation, bringing it to lowest level since the tail end of the pandemic.

This is good news, but there is more to do—like lowering more everyday costs of living, cutting red tape, and taking on price gougers.https://t.co/sMvQuw0e0Q

— Rep. Salud Carbajal (@RepCarbajal) August 17, 2024

Inflation cools with gradual momentum

Costs for used vehicles, medical care, airline tickets, and apparel all fell in July from June levels. Rubeela Farooqi, a prominent U.S. economist, stated that the inflation data came in as expected, with no signs of a significant crash in prices. Today’s report will raise confidence within the Fed that inflation is indeed on a sustainable path towards 2%,” she said. Farooqi predicted that the Fed would likely engage in “a string of modest rate cuts,” rather than any drastic measures. The Fed has raised interest rates to their highest level in 23 years in an effort to control inflation while maintaining economic stability. However, a weaker July jobs report indicated potential stress in the labor market due to high rates. This increases the likelihood of the Federal Reserve reducing its benchmark rate at its upcoming meeting. While inflation has been a primary concern, the unexpectedly soft July jobs report has raised alarms about the risk of a slowdown in job growth. The Fed’s next moves will be critical for the U.S. economy.