Key Facts:

1. CPI rose by 0.2% in August 2024.
2. Yearly inflation rate decreased to 2.5%, the lowest since February 2021.
3. Core CPI, excluding food and energy, rose by 0.3% in August.
4. Shelter costs increased by 0.5%, driving most inflation.
5. Food prices increased by 0.1%, while energy costs dropped by 0.8%.
6. Gasoline prices fell by 0.6% in August.
7. Real earnings increased, surpassing CPI growth by 0.2%.
8. The Federal Reserve is likely to reduce interest rates by 25 basis points.
9. Shelter contributed 70% of the core CPI increase.
10. Job market slowdown is becoming a concern for the Federal Reserve.

According to the Bureau of Labor Statistics, the Consumer Price Index (CPI) rose by 0.2% in August, replicating the July print. The year-over-year inflation rate dropped to 2.5%, the lowest since February 2021, approaching the Fed’s two percent target level. Core inflation, which excludes food and energy, increased by 0.3% for the month, a smidgen above expectations and bringing the 12-month core CPI to 3.2%. Shelter costs are still sticky, rising 0.5%, while food prices increased slightly by 0.1%. Energy costs fell, with the gasoline index falling by 0.6%. The data set the stage for the Federal Reserve’s upcoming meeting, where traders expect an 85% chance of a 25-basis-point interest rate cut. Real earnings increased, with average hourly wages outpacing inflation by 0.2%. However, persistent shelter and core services inflation may prevent more aggressive rate cuts. The labor market is slowing, and caution is being shown to the Fed about further economic softening.