News
Article
Author(s):
Decline likely means a 0.25% interest rate cut from the Federal Reserve
Inflation moderates: ©Superzoom - stock.adobe.com
In August, prices rose as expected while the annual inflation rate dipped to its lowest level since February 2021, according to a Labor Department report. This decline sets the stage for a likely 0.25% rate cut from the Federal Reserve in its upcoming meeting.
The consumer price index (CPI), which measures the overall cost of goods and services in the U.S. economy, saw a 0.2% monthly increase, in line with expectations. This brought the 12-month inflation rate down to 2.5%, a slight drop from July's 2.9%. However, the core CPI—which excludes volatile categories such as food and energy—rose by 0.3%, a bit higher than the anticipated 0.2%. The core inflation rate over the past 12 months stood at 3.2%, matching forecasts.
Despite the positive signs of moderating inflation, housing costs continue to pressure the overall index. The shelter component, which comprises roughly one-third of the CPI, rose 0.5% for the month and 5.2% over the past year. This sector accounted for much of the all-items index increase.
Food prices remained stable with a modest 0.1% rise, while energy prices dropped by 0.8%. Other areas of the report showed that used vehicle prices fell 1%, medical care services dipped 0.1%, medical care commodities fell 0.2%, and apparel prices increased 0.3%.
In the federal funds futures market, traders are now pricing in an 85% chance that the Federal Reserve will announce a 25 basis point rate cut at its next meeting on September 18, according to CME Group’s FedWatch tool.
Stay informed and empowered with Medical Economics enewsletter, delivering expert insights, financial strategies, practice management tips and technology trends — tailored for today’s physicians.