Inflation below three percent for the first time since 2021, CPI report shows

Inflation has dropped below three percent measured on a year-over-year basis for the first time in three years, according to figures from the Bureau of Labor Statistics.

Annual inflation in July was 2.9 percent, going below three percent for the first time since March 2021, when prices increased following the effects of the Covid-19 pandemic.

This possibly sets up the Federal Reserve to cut interest rates to ease the pressures on the economy. A measure that removes more erratic categories like food and energy had the smallest increase over the course of 12 months since April 2021. “Core” prices increased 0.2 percent on a monthly basis and 3.2 percent compared to a year ago.

The Labor Department’s Bureau of Labor Statistics said on Wednesday that the consumer price index increased 0.2 percent last month after decreasing by 0.1 percent in June.

The new numbers were mostly close to what analysts expected and may lead to officials at the central bank agreeing to cut interest rates during their policy meeting next month.

Officials have said for months that borrowing costs won’t be eased until they’re sure inflation is decreasing to normal levels and they’re now increasingly recognizing that there are risks of having interest rates re high for too long.

Hiring has already slowed and the global markets are concerned that the Federal Reserve may have put too much pressure on the economy, The Washington Post noted.

Housing res the driver of inflation, accounting for almost 90 percent of the monthly rise. On a month-to-month basis, rents rose by 0.5 percent, compared to a rise of 0.3 percent in June. The measure of homeownership costs also rose.

Meanwhile, energy costs were stagnant after several months of decreasing figures.

Car insurance and home furniture were on the rise in July while used cars, healthcare, flights, and clothing costs went down compared to the previous month. The cost of gas is also down compared to last year, with possible interest rate cuts in September affording some hope to those who are trying to get a mortgage, a loan for a car, or expand their businesses.

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