Inflation ticked up 2.9% the United States over the year to July, marking the slowest increase in prices since March 2021.
This was just shy of expectations for a 3.0% increase and supports expectations for the Federal Reserve to begin cutting base interest next month, according to analysts.
On a monthly basis, consumer prices rose by 0.2%, following a 0.1% decline in June, Bureau of Labour Statistics data showed on Wednesday.
Core inflation, excluding volatile food and energy prices, increased at its slowest pace since April 2021 by 3.2%.
TD Securities’ Gennadiy Goldberg noted the figures “really ticked the box for a September rate cut”.
“It gives the Fed maximum flexibility,” he said, adding “the big question they have to decide is whether they should cut [by] 25 or 50” basis points.
Capital Economics’ Paul Paul Ashworth added a 25 basis point cut was most likely, given the data did not “suggest price pressures are collapsing in a way that could warrant a bigger [...] reduction”.
That said, Quilter Cheviot research head Richard Carter reassured that “investors should be calmed knowing that rate cuts are coming,” after a weak US jobs report earlier in the month led to a global sell-off.
The figures prompted a muted response from investors, with the Dow Jones ticking up 0.2% on Wednesday morning, as the Nasdaq and S&P 500 fell 0.5% and 0.1% respectively.