Latest inflation figures revealed: paving the way for a big change that hasn’t happened in years

The Federal Reserve is expected to cut interest rates at its next meeting on Sept. 18, bringing down benchmark borrowing costs from a 23-year high and providing some relief to households.

Following an aggressive rate hike campaign, interest rates will be set at between 5.25 and 5.5 percent from July 2023.

The Fed has not cut rates since the start of the Covid-19 pandemic in 2020.

Investors now predict the central bank will cut rates by a quarter of a percentage point next week, rather than the more unusual half-percentage point cut.

A rate cut is good news for consumers, as it would lower rates on credit cards and auto loans and help keep mortgage costs lower.

The probability of a larger-than-normal rate cut next week is now around 15 percent, according to the CME FedWatch tool, down from 34 percent on Tuesday.

The higher-than-expected core inflation figure means the central bank is likely to be more cautious, experts say.

“With core inflation higher than expected, the Fed’s path to a 50 basis point cut has become more complicated,” said Seema Shah, chief global strategist at Principal Asset Management.

‘The figure is certainly not a barrier to policy action next week, but the committee’s hawks will likely seize on today’s CPI report as evidence that the last mile of inflation needs to be managed carefully and cautiously – a formidable reason to opt for a 25 basis point cut.’

Credit card rates move in line with the Federal Reserve’s benchmark figure, so they would quickly reflect a cut and provide some breathing room for borrowers.

Mortgage rates are already falling, averaging 6.35 percent for a 30-year fixed-rate contract, according to Freddie Mac’s latest data as of Sept. 5.

Benchmark borrowing costs do not directly affect mortgage rates, but home loans do track the yield on 10-year Treasury bonds.

Bonds are influenced by several factors, including inflation predictions, Fed actions, and investor reactions as a result.

This means that mortgage borrowing costs will fall when banks believe that future rate cuts are likely.

High mortgage rates have been a deterrent to home buyers in recent years, along with high property prices and a shortage of homes for sale.

Lower mortgage rates would be a boost for those looking to refinance or buy a home, and experts expect this to start moving the housing market.

Food inflation continued to ease last month, encouraging news for consumers fed up with high prices.

Overall, food prices rose 0.1 percent in the month, compared with a 0.2 percent increase in July.

On an annual basis, food prices rose 2.1 percent through August, compared with 2.2 percent in the previous month.

Fruit and vegetable prices fell 0.2 percent on the month, but other commodities rose.

The price of eggs, for example, rose 4.8 percent from July, the largest increase of any product included in the index.

Although food inflation is increasing at a slower rate, many Americans still struggle with food prices at supermarkets.

Food prices have risen 20 percent over the past five years, according to data from the Labor Department.

Although the annual inflation rate cooled in August, the monthly “core” price index came in higher than expected.

That measure, which excludes volatile food and energy prices, rose 0.3 percent, driven largely by housing costs.

Housing has been a particularly resilient category to inflation, even as other prices have begun to decline.

Housing costs accounted for more than 70 percent of the year-over-year increase in core prices.

U.S. stocks fell Wednesday morning as Wall Street digested the latest consumer inflation report.

The Dow Jones Industrial Average fell nearly 0.6 percent, the S&P 500 fell about 0.4 percent and the Nasdaq lost about 0.4 percent.

Investors have been eagerly awaiting inflation figures to determine how much the Federal Reserve will cut rates next week.

Prices rose 2.5 percent in the year through August, new figures from the Bureau of Labor Statistics showed.

This figure is lower than economists’ expectations, who had forecast a 2.6 percent increase in prices, and is the lowest annual inflation rate since February 2021.

The consumer price index rose 0.2 percent during the month, the same rate as in July.

“Core” prices, which exclude food and energy, rose 0.3 percent from July and 3.2 percent from a year earlier.

This figure was slightly higher than expected, largely due to rising housing costs.