US inflation slows to 2.5% in August

The US annual inflation rate slowed more than expected in August, recording its lowest pace in more than three years, thus backing the possibility of the Federal Reserve starting to cut rates at its meeting next week.

Annual consumer price index slowed to 2.5% in August, from 2.9% in July, recording its lowest rate since February 2021, and compared to expectations of 2.6%, according to data released by the Bureau of Labor Statistics on Wednesday.

Core CPI - which excludes volatile items such as food and energy prices - remained unchanged at 3.2% in August, compared to 4.4% in August 2023.

Housing prices rose 5.2% year-on-year, accounting for more than 70% of the increase in annual core inflation, while motor insurance and healthcare prices rose 16.5% and 3%, respectively.

On a month-on-month basis, the US CPI rose 0.2% in August, the same as the previous month, while core CPI was up 0.3% after increasing 0.2% in July.

The rise by 0.5% in the housing index, which accounts for about a third of the CPI weighting, the biggest contributor to monthly inflation. Housing prices rose 5.2% year-on-year in August, the data showed.

Meanwhile, energy prices fell 0.8% MoM and 4% YoY in August, with gasoline prices down 10.3%.

Food prices were up 0.1% in August after rising 0.2% in each of the previous two months. Airline prices rose 3.9% last month after declining in the previous five months.