U.S. inflation slows to 3-year low. Can the Fed cut rates now?

globalnews.ca:

Year-over-year inflation reached its lowest level in more than three years in July, the latest sign that the worst price spike in four decades is fading and setting up the Federal Reserve for an interest rate cut in September.

Wednesday’s report from the Labor Department showed that consumer prices rose just 0.2 per cent from June to July after dropping slightly the previous month for the first time in four years. Measured from a year earlier, prices rose 2.9 per cent, down from three per cent in June. It was the mildest year-over-year inflation figure since March 2021.

The government said nearly all the increase in the monthly inflation figure reflected higher rental prices and other housing costs, a trend that, according to real-time data, is easing.

Inflation has taken a central role in the presidential election, with former President Donald Trump blaming the Biden administration’s energy policies for the price increases. Vice President Kamala Harris on Saturday said she would soon unveil new proposals to “bring down costs and also strengthen the economy overall.”

In July, grocery prices rose just 0.1 per cent and are a scant 1.1 per cent higher than they were a year earlier, a much slower pace of growth than in previous years. Yet many Americans are still struggling with food prices, which remain 21% above where they were three years ago, though average wages have also sharply increased since then.

Gas prices were unchanged from June to July and have actually fallen 2.2 per cent in the past year. Clothing prices also dropped last month; they’re nearly unchanged from 12 months earlier. New and used car prices fell in July, too. Used car prices, which had skyrocketed during the pandemic, have tumbled nearly 11 per cent