While the wait continues for the Federal Reserve to start cutting interest rates, inflation fell to its lowest point since 2021 last month.
According to new figures in the Consumer Price Index from the Bureau of Labor Statistics released Wednesday, the annual inflation rate fell to 2.9 percent in July. It was the first time the annual inflation rate was under 3 percent since March 2021.
The Federal Open Market Committee is set to meet Sept. 17-18 after keeping a pause on rates in August, with the target rate remaining at 5.25 to 5.5 percent. Federal Reserve Chairman Jerome Powell said that after that meeting, the committee would base any decision to cut rates on the CPI numbers and recent job reports. The July jobs numbers from the BLS showed a softening in the labor market, with the economy adding only 114,000 jobs and unemployment rising to 4.3 percent. The 114,000 jobs added was 101,000 below the monthly average from the previous 12 months.
“We get a lot of data between now and September. It is going to be the totality of the data, all of the data, and not just how is it affecting the outlook and balance of risk. That’s going to be the assessment that we do,” Powell said after the last FOMC meeting.
“All of the data points continue to point to the direction that we would want to see…What’s in the data right now is an economy that’s growing at a solid pace. A labor market that has cooled off. Unemployment is low. The data overall show a strong labor market. It is neither an overheating economy nor is it a sharply weakening economy… What we’re seeing is strong economic activity – a good labor market and inflation coming down.”
The all-items-less-food-and-energy index rose 3.2 percent, the smallest spike since April 2021.
Used vehicles continued to fall on the CPI, down 10.9 percent in the past year. In July, used vehicles dropped 2.3 percent, the largest fall since January’s 3.4 percent.
Drivers are still battling increases in motor vehicle insurance, which rose another 1.2 percent in July. For the past year, motor vehicle insurance is up 18.6 percent.
