Consumer prices rose 0.2% in August as annual inflation rate hits lowest since early 2021

Prices increased as expected in August while the annual inflation rate declined to its lowest level since February 2021, according to a Labor Department report Wednesday that sets the stage for an expected quarter percentage point rate cut from the Federal Reserve in a week.

The consumer price index, a broad measure of goods and services costs across the U.S. economy, increased 0.2% for the month, in line with the Dow Jones consensus, the Bureau of Labor Statistics reported.

That put the 12-month inflation rate at 2.5%, down 0.4 percentage point from the July level and compared to the estimate for 2.6%.

However, core CPI, which excludes volatile food and energy prices, increased 0.3% for the month, slightly higher than the 0.2% estimate. The 12-month core inflation rate was 3.2%, in line with the forecast.

While the numbers showed that inflation slowly continued to moderate, housing-related costs remain an issue. The shelter component of CPI, which has about a one-third weighting in the index, increased 0.5%, accounting for much of the increase in the all-items measure. The shelter index was up 5.2% year over year.

Food prices rose just 0.1%, while energy costs slid 0.8%.

Elsewhere in the report, used vehicle prices decreased 1%, medical care services declined 0.1% and apparel prices increased 0.3%.

Stock market futures moved lower following the report though Treasury yields spiked.

In the fed funds futures market, traders priced in an 85% chance that the Federal Open Market Committee will approve a quarter percentage point, or 25 basis point, interest rate reduction when its meeting concludes Sept. 18, according to the CME Group”s FedWatch measure.

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