In a very important development for the US economy, the latest Consumer Price Index report indicates that inflation rate fell to 2.5% in August 2024. This is a crucial development for the Federal Reserve, which is set to cut interest rates for the first time in more than four weeks.
The rate cut is expected to happen as early as next week. Inflation data remains above the Fed’s 2% target, but circumstances have brought the cut ahead of schedule. Currently, CME Group’s FedWatch tool projects a 71% chance of a 25 basis point rate cut at the next FOMC meeting on September 17.
US inflation falls below August 2024 forecast
The US economy has been in a state of uncertainty for a long time. As the recovery from the pandemic continues, the Federal Reserve has been trying to contend with stubborn inflation data, resulting in years of interest rate hikes that have unsettled many. Although necessary, delays in raising interest rates have been a continuing problem.
August was always going to be a key date for such a cut. The Consumer Price Index is currently recording lower-than-expected readings. In fact, US inflation fell to 2.5% in August 2024, lower than experts had predicted for that month. Moreover, it is lower than July’s inflation rate of 2.6%. So the Fed is closer than ever to its 2% inflation target.
It looks like the long-awaited rate cut is finally on the way. The stock market crash in early August wiped $2 trillion out of the U.S. market, which turned the Fed’s attention to interest rates. Specifically, the markets urged the central bank to step in and cut interest rates to their highest in 23 years.
With inflation seemingly firmly in check after soaring in 2021 to its highest levels in decades, this path may finally be paying off: next week, the Federal Reserve will finally announce the interest rate cuts that many have been hoping for, bringing the country closer to the soft landing people have been hoping for.
