The inflation rate in the United States has dropped to 2.5% in August, marking the fifth year-on-year decline in a row and the lowest increase since February 2021. According to the report by the Labour Department, consumer prices increased by 2.5% in August from the previous year, reducing from a 2.9% increase recorded in July.
The reduction in inflation can be explained by falling gas prices, which declined by 0.6% between July and August, while being lower than 10.6% compared to last year. Similarly, used vehicle costs went down by 1% last month alone, with an average drop of up to 10.4% as compared to the same time last year. This fact is demonstrated by the maintenance of grocery prices between July and August, indicating that food costs have cooled.
Next week, the Federal Reserve will lower interest rates based on this decline in inflation and support for job opportunities. Going down by a quarter-point, it will make borrowing across all sectors cheaper.
The latest inflation figures may have an impact on presidential elections, where ex-President Donald Trump blames the inflation surge of 2021 on Vice President Kamala Harris. She has proposed subsidies for home buyers/builders to cushion against housing costs, while she backs a federal prohibition on price enumeration for groceries.
Rents/housing costs rose quicker from July to August, which led to a slight core inflation increase; however, Fed officials are predicting a consistent cooling down of housing costs across the months ahead.
