US inflation cools at slowest pace in over 3 years to 2.9% in July

US annual inflation slipped against expectations to its lowest level in more than three years in July, setting up the stage for the Federal Reserve for a possible interest rate cut in September.

Data from the US Labor Department issued today, Aug. 14, showed that consumer prices, measured from a year earlier, rose 2.9% in July, down from 3% in June, against forecasts for it to stabilize at the same pace. This is the mildest annual inflation figure since March 2021.

Excluding the volatile food and energy categories, core inflation, compared to a year ago, advanced 3.2% last month, down from 3.3% in June, the lowest since April 2021.

In terms of monthly changes, consumer prices climbed by 0.2% in July, in line with expectations, after falling by 0.1% in June and remaining unchanged in May. Its core counterpart surged by the same percentage in July, after adding 0.1% in the previous month.

The 0.4% increase in owner-occupier costs (CPIH) fueled the 90% monthly hike in last month’s general inflation index reading. Meanwhile, food prices nudged up by 0.2% in July, in tandem with stable energy prices for the same month.

However, this data should not be deemed drivers for the US central bank to ease monetary policy in the future, as the slowdown in annual inflation is deemed a sound indicator of containing price pressures compared to in the wake of the corona crisis.