It was good news-bad news on US inflation Wednesday. The good news is overall inflation continued along its downward path toward the Federal Reserve’s desired threshold of 2%. The bad news is, when you strip out traditionally volatile items like food and gas (though critical to consumers), inflation went up thanks largely to housing and travel. From that angle, things are looking a little worse for American consumers—and Wall Street, too, since investor fever dreams of a half-point rate cut by the Federal Reserve later this month were likely dashed.
A big reason the CPI is slowing is that the cost of oil has been dropping, which means gas prices have been lower. Though oil climbed Wednesday as Hurricane Francine crossed over key oil-producing zones in the Gulf of Mexico, the price has fallen from close to $85 a barrel in July to almost $65 a barrel this week. The recent retreat has already seen OPEC+ postpone an output hike, stoking investor concerns that the extra barrels could still be brought to the market closer to 2025. The International Energy Agency—which will issue a revised monthly outlook later this week—said in August the market risked higher inventories next year even if the cartel canceled the output increase. That, of course, is likely good news for consumers.