US inflation slows in August
The August CPI report was mostly in line with economists’ expectations. Headline inflation fell to 2.5%up from 2.9% in the previous month, and represents the smallest increase in over three and a half years.
While we continue to see steady progress in moderating price increasescore inflation, which excludes food and energy volatility, rose by 0.3% for the month versus the 0.2% forecast. However, for the year to date, it remained flat at 3.2% and this one-off reading should not cause concern.
Today’s data is the last significant signal before next week’s Fed meeting.. Recall that the Fed has emphasized that its decision is based on a collection of data rather than a single point – with headline inflation falling for the fifth consecutive month, the data should provide the Fed with more than enough evidence. Especially given the recent weakness in the labor market, the data should give the Fed carte blanche to start cutting rates on September 18.
While this report is good news for stock market bulls, it may not provide the same relief for equities that we have seen with previous “not so hot” readings. The inflation report has long been the most critical number for the marketbut has recently been overtaken by concerns about a cooling labor market and recession worries.
*eToro Market Analyst on US Inflation
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