US Inflation Fell to 2.5% Last Month

US inflation fell to 2.5% in August, setting the stage for the Federal Reserve to consider cutting interest rates at its meeting next week.

That is down from inflation of 2.9% in July and slightly below the 2.6% forecast of economists polled by Reuters.

The core consumer price index (CPI), which excludes more volatile food and energy prices, held steady at 3.2%, according to the Bureau of Labor Statistics.

This inflation data is one of the last important economic indicators before the Federal Reserve’s September 18 meeting, at which a decision could be made on a potential rate cut.

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Current interest rates, which range from 5.25 percent to 5.5 percent, are at a 23-year high. Lower inflation signals progress toward the Fed’s goal of bringing it closer to 2%, which could justify a rate cut.

In response to the inflation data, two-year Treasury yields, which reflect interest rate expectations, rose to 3.69%. Meanwhile, futures on the S&P 500 and Nasdaq 100 fell 0.5% after the report.

Alexander Stefanov