US consumer prices rose moderately in August By Reuters

WASHINGTON (Reuters) – U.S. consumer prices rose marginally in August, but core inflation showed some resilience, which could deter the Federal Reserve from cutting interest rates by half a point next week.

The consumer price index rose 0.2 percent last month after rising 0.2 percent in July, the Labor Department’s Bureau of Labor Statistics said Wednesday. In the 12 months to August, the CPI rose by 2.5%. This was the smallest annual increase since February 2021 and followed a 2.9% rise in July.

Economists polled by Reuters had expected CPI to rise 0.2 percent and rise 2.6 percent year-on-year. Although inflation remains above the US central bank’s 2% target, it has slowed considerably, allowing policymakers to focus more on the labor market in their bid to support the economic expansion.

Government data last week showed nonfarm payrolls rose less than expected in August, but the jobless rate fell to 4.2 percent from a near three-year high of 4.3 percent in July, reducing the chances of a rate cut by 50 basis points and increasing the odds of a quarter. – reduction of points.

The labor force is cooling amid a significant moderation in hiring, reducing risks of a rekindling of inflation.

Early Wednesday, financial markets pegged a roughly 29 percent probability of a 50-basis-point interest rate cut at the Fed’s Sept. 17-18 policy meeting, according to CME Group’s (NASDAQ: ) FedWatch tool. The odds of a quarter-point rate cut were about 71%.

The central bank kept its benchmark overnight interest rate in the current range of 5.25%-5.50% for a year, after raising it by 525 basis points in 2022 and 2023.

Annual consumer price growth has slowed considerably from a peak of 9.1% in June 2022 as higher borrowing costs dampen demand.

Excluding volatile food and energy components, the CPI rose 0.3% in August after rising 0.2% in July. In the 12 months to August, the so-called core CPI rose by 3.2%. This followed a 3.2% increase in July.

Some economists warned that lingering core inflation argued against a half-point interest rate cut next Wednesday.