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.
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.
Cryptocurrency investors are closely watching the Federal Reserve’s interest rate decision set for tomorrow.
BlackRock Investment Institute is skeptical about the Federal Reserve implementing as many rate cuts as the bond market anticipates.
Billionaire Peter Thiel has expressed concern that the US economy would likely be in a recession if not for extensive government intervention.
A group of Democratic senators, led by Elizabeth Warren, is pressing Federal Reserve Chair Jerome Powell to implement a significant reduction in interest rates to protect the U.S. economy.