Inflation Falls to 2.5% in August, Extending Cooling Streak
Key Points
- U.S. inflation fell to 2.5% in August, the lowest level since October 2021.
- The decline was driven by lower energy and food prices.
- The Fed is expected to continue raising interest rates to further cool inflation.
What Happened?
Inflation in the United States fell to 2.5% in August, according to data released by the Bureau of Labor Statistics. This is the lowest level since October 2021, when inflation was also 2.5%.
The decline in inflation was driven by lower energy and food prices. The energy index fell 5.0% in August, the largest monthly decline since April 2020. The food index also fell, by 0.2%.
What Does This Mean?
The decline in inflation is a sign that the Federal Reserve's efforts to cool inflation are working. The Fed has been raising interest rates since March, and these rate hikes are starting to have an impact on the economy.
However, inflation is still well above the Fed's target of 2%. The Fed is expected to continue raising interest rates until inflation falls closer to its target.
What to Expect
The Fed is expected to raise interest rates by another 75 basis points at its meeting in September. This would be the third consecutive 75 basis point rate hike.
The Fed's goal is to bring inflation down to its target of 2%. However, it is likely to take some time for inflation to fall to this level. The Fed has indicated that it is willing to raise interest rates as much as necessary to bring inflation under control.
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