Inflation Research Brief

Pricing pressures fell to over three-year low. In July, annual growth in the headline Consumer Price Index (CPI) fell below 3.0 percent for the first time since March 2021. Meanwhile, core CPI inflation, which strips out prices for food and energy, also moderated to a 38-month low of 3.2 percent. After the labor market showed clear signs of softening in July, this continued, broad-based retreat in consumer pricing pressures safeguards the potential for the Federal Reserve to begin easing monetary policy at its next meeting. While Wall Street currently views a September rate cut from the Federal Reserve as a near certainty, the magnitude will likely be dictated by downward movement in the core PCE inflation measure released at the end of this month, and whether the U.S. labor market continues to slow.