Inflation in the US continued to cool last month, official figures showed, raising confidence that the US central bank will cut interest rates next week.
Consumer prices rose 2.5% over the 12 months to August, as prices for petrol, used cars and trucks, and some other items fell.
That marked the slowest pace since February 2021 and was down from 2.9% in July, despite an unexpected rise in housing costs.
The Labor Department figures come during a presidential campaign in which rising living costs have been a key issue.
Analysts said the data increased the likelihood that the Federal Reserve would cut interest rates at its meeting next week, but reduced the odds of bigger cut.
“Overall, inflation appears to have been successfully tamed but, with housing inflation still refusing to moderate as quickly as hoped, it hasn’t been completely vanquished,” said Paul Ashworth, chief North America economist for Capital Economics.
Stripping out food and energy prices – which tend to fluctuate and can obscure underlying trends – prices were up 3.2% over the year, as airline tickets, car insurance, rent, and other housing costs grew more expensive.
Over the month, prices rose 0.2%, the same as in July.
“This serves as a bit of a reminder not to get too carried away with a few months of better inflation data,” said Brian Coulton, Fitch Rating’s chief economist.
“Certainly not enough to stop the Fed cutting rates later this month, but the stickiness of services inflation… will be one reason why the Fed will not be cutting rates at an aggressive pace over the next year or so.”
Central banks, including the Fed, started upping borrowing costs two years ago in an attempt to slow prices rises, which picked up globally in 2021 because of pandemic-related supply issues and a jump in government spending.
Russia’s invasion of Ukraine in 2022 then caused oil prices to surge, further fuelling global inflation.
US inflation hit a high of 9.1% in June 2022, but has since fallen closer to the 2% rate considered healthy.