US inflation in August showed some improvement over expectations, with the annual inflation rate slowing to 2.5%, down from 2.9% in July.
This marked the lowest inflation rate since February 2021 and came in below the forecast of 2.6%.
Energy prices contributed significantly to the decline, with gasoline prices dropping by 10.3% and fuel oil by 12.1%.
Food prices also eased, recording a 2.1% increase compared to 2.2% in the previous month, and transportation inflation fell to 7.9% from 8.8%.
In contrast, shelter costs rose by 5.2%, up from 5.1% in July, and remained the primary factor in the monthly rise of the Consumer Price Index (CPI).
On a monthly basis, the CPI increased by 0.2%, consistent with the prior month and meeting market expectations.
Core inflation, which excludes food and energy, rose by 0.3% in August, exceeding the anticipated 0.2%.
Despite the inflation print coming in better than expected, it is unlikely to be enough to rebase the market’s interest rate expectations from the Federal Reserve.
The likelihood remains that the Fed will cut the base rate by 25 basis points rather than the meatier 50 basis points that some doves would like to see.