US inflation trending lower, but some stickiness remains

U.S. consumer prices rose slightly in August, but underlying inflation showed some stickiness amid higher costs for housing and other services, further dashing hopes of a half-point interest rate cut from the Federal Reserve next week.

The mixed inflation report from the Labor Department on Wednesday followed data last week showing the labor market still cooling in an orderly fashion in August, defying fears of a sharp deterioration, with the unemployment rate retreating from a near three-year high touched in July.

Financial markets boosted the chances of a quarter-point rate cut next Wednesday and sharply lowered the probabilities of a 50 basis point reduction.

“The road to normal inflation hit a bump in August as lingering pressures for housing and service costs once again cropped up,” said Ben Ayers, senior economist at Nationwide. “This should clinch a smaller, 25 basis points rate cut from the Fed next week as Fed officials remain wary to feed any lingering price momentum for the economy.”

 

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