U.S. inflation accelerated modestly in August, suggesting the Federal Reserve may have some leeway to cut interest rates at its September meeting.
Consumer prices rose an annual 2.9% in August, the Labor Department said on Sept. 11, up from a 2.7% annual increase in July. But a reading of “core inflation,” which ignores more volatile categories of spending, stripping out food and energy items, was at 3.1% for the second month in a row.
Both readings matched the consensus forecast from economists surveyed by Bloomberg, and come on the heels of reports that suggest the labor market is weaker than many experts previously believed.
More: The jobs reports were revised down by 911,000. What does it say about the economy?
As long as inflation remains tame, the central bank has the option of cutting rates to try to boost demand – and hiring – in the economy. As of Sept. 10, traders saw a 100% chance of rate cuts when the Fed meets September 17, with 90% expecting one 25-basis point cut and 10% forecasting two, according to the CME FedWatch tool.
