AUGUST 19, 2024 – INFLATION FALLS BELOW 3 PERCENT
The Consumer Price index (CPI) rose 0.2 percent in July, bringing the 12-month inflation rate to 2.9 percent, the lowest it has been since March 2021. The core CPI (excluding food and energy) was up 0.2 percent for the month and 3.2 percent for the year. The data came in slightly below expectations. The numbers suggest a rate cut in September is expected as inflation eased and the labor market weakened.
The drop in the inflation rate is encouraging, but it is still running about one percent above the Fed’s 2 percent target. If the trend continues, the Fed could lower rates by 0.25 percent in September, but the urgency for a 0.5 percent change does not seem warranted.
Atlanta Fed Chair Ralph Bostic was interviewed last week, he said he is in no hurry to act. He prefers a patient approach and is loath to lower rates just to have to raise them again if inflation rebounds. He sees both inflation and the labor market as “weakening, but not weak.” To that point, retail sales in July were up 1 percent, much better than the expected 0.3 percent, and jobless claims also eased last week.
The next Fed meeting is scheduled for September 17-18, there will be two more meetings before the end of the year in November and December.