In what is an immensely important development for the US economy, the latest Consumer Price Index report shows that inflation fell to 2.5% in August 2024. The development is massively important to the Federal Reserve, as they look to issue their first interest rate cuts in more than four weeks.
The expectation is that those cuts will come as early as next week. Although the inflation data is still above the Fed’s 2% target, circumstances have pushed cuts ahead of schedule. Currently, the CME Group FedWatch tool predicts a 71% chance of a 25 basis point cut during the next FOMC meeting on September 17th.
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US Inflation Falls Below Expectations for August 2024
The United States economy has long been languishing in a state of fragility. Following the continued pandemic recovery, the Federal Reserve has sought to fight stubborn inflation data. That resulted in a years-long interest rate hike that concerned many. Although it was necessary, a delayed reversal became an ongoing issue.
In order to get to those cuts, August was always a crucial date. Now, the Consumer Price Index has reported lower-than-expected readings. Indeed, US inflation fell to 2.5% in August 2024, which fell below what experts had projected for the month. Moreover, it’s down from the 2.6% inflation figure for July. Therefore, leading the Fed closer than ever to its 2% inflation target.
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The long-awaited cuts look to be finally coming soon. Following a stock market crash in early August that wiped out $2 trillion from the American market, the Fed turned its attention toward interest rates. Specifically, the market urged their intervention. Calling for the Central Bank to cut the 23-year high figure.
Inflation looks to be firmly under control since it ballooned in 2021. At the highest level in decades, the pathway looks to be finally bearing fruit. Next week should see the Federal Reserve finally issue the interest rate cuts that many had been expecting. Bringing the country closer to the soft landing they had been hoping for.