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Inflation Breakdown for August 2024: A Promising Trend
As the U.S. economy continues to navigate the aftermath of the pandemic, recent data suggests that inflation is finally showing signs of easing. The consumer price index (CPI) rose by 2.5% in August, marking the lowest reading since February 2021. This decline is a significant departure from the pandemic peak of 9.1% in mid-2022, and it brings us closer to the long-term target of around 2% set by policymakers.
Sarah House, a senior economist at Wells Fargo Economics, notes that overall inflationary pressures are "dissipating." This trend is largely driven by stabilization in essential items like groceries and gasoline, which have seen significant price drops over the past year. For instance, gasoline prices have decreased by around 10% since last year, while grocery inflation remains below 1%.
Despite this progress, some areas remain concerning, particularly the housing sector. Housing inflation, categorized under "services," has been a significant barrier to overall inflation reaching the Fed's target. The shelter component, which is the largest part of the CPI, has increased by 5.5% since 2022, contributing to over 70% of the annual rise in the "core" CPI. However, positive developments in the real-time rental market have shown little inflation for nearly two years, with average rents decreasing 1% in the quarter of 2024 compared to the previous year.
Economists expect the U.S. Federal Reserve to initiate interest rate cuts this month, shifting its focus from combating inflation to preventing a recession amid signs of a cooling job market. Both House and Ashworth predict that the Fed will reduce rates by a quarter percentage point at its upcoming policy meeting next week.
The August inflation figure represents a substantial drop from the pandemic peak and is approaching the long-term target. This trend is expected to continue, with the Fed's focus now on preventing a recession. As the economy continues to evolve, it will be crucial to monitor these developments and their impact on the broader market.
Original Article: https://www.cnbc.com/2024/09/11/heres-the-inflation-breakdown-for-august-2024-in-one-chart.html
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