New CPI report shows another month of cooling inflation
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The Consumer Price Index rose 0.2% in August, while the gauge that excludes food and energy rose 0.3%, the government said on Wednesday.
Why it matters: The August data is the latest evidence that the inflation crisis is over, as the Federal Reserve looks to lower interest rates as soon as next week and take some pressure off the economy.
By the numbers: In the 12 months through August, CPI rose 2.5% compared to the 2.9% in July—the smallest annual increase since 2021.
- Core CPI, which excludes volatile food and energy prices, rose 3.2% in the year ending in August, the same as July.
Details: The overall index's monthly gain matched that in July, while the core CPI rose at a slightly faster rate.
- The indexes for car, trucks and furniture were among those that saw outright declines in price, while costs for rent, airline fares and car insurance increased.
The big picture: Since the inflation shock began, the Consumer Price Index—along with a separate inflation gauge watched by the Fed—consumed economists' attention.
- Now that rapid price hikes have subsided, that is no longer the case. The Fed says its focus has pivoted to the labor market that is showing cracks.
- The central bank is all but certain to slash rates from a two-decade high at its policy meeting next week.
- Still unclear is whether officials will vote to cut rates by a quarter percentage point, or by a more drastic half percentage point.
The bottom line: Voters remain downbeat about the health of the economy. While the change in prices is slowing, price levels are still higher than pre-pandemic times.
Editor's note: This story was updated with a new chart.
