Washington, September 12 (Patrika English News): A firmer US inflation reading for August is unlikely to derail the Federal Reserve’s plan to cut interest rates next week, but analysts say it rules out a larger half-point reduction.
The Consumer Price Index (CPI) showed core inflation, excluding food and energy, held steady at 3.1% year-on-year in August. On a monthly basis, prices rose 0.4%, slightly above the 0.3% forecast. Headline inflation edged up to 2.9% from 2.7% in July.
“Despite a slightly firmer gain in the core CPI in August… there was not much for the FOMC to fret about,” said Capital Economics economist Stephen Brown, noting that the data supports a 25-basis point cut instead of 50 bps.
Labor market data has also signalled weakness. Jobless claims climbed to 263,000 last week, the highest in four years, while August payrolls rose by just 22,000, well below expectations. The unemployment rate ticked up to 4.3%.
Markets are now pricing in near certainty of a 25 bps cut when Fed Chair Jerome Powell leads the policy meeting next Tuesday and Wednesday. Powell had already hinted at easing during his Jackson Hole speech in August, citing shifting risks.
Former Kansas City Fed president Esther George said inflation appears to be stuck around 3%, even as jobs data point to a cooling labour market. “I don’t think I’ve heard anyone try to dissuade markets that a 25 basis point cut isn’t coming,” she said.
Meanwhile, political pressure on the Fed remains high. President Trump has repeatedly called for deeper cuts and is pushing for more of his nominees to join the central bank ahead of next week’s meeting.