The closely watched gauge on inflation in the United States slowed again in July, setting up a potential interest rate cut by the Federal Reserve.
A Labor Department report released Wednesday showed that consumer prices were up 0.2% from June to July after falling slightly the previous month.
Meanwhile, prices for the 12-month period ending last month were up 2.9% compared to a year earlier, marking the first time the inflation rate has fallen below 3% since early 2021.
The prices of food, shelter, and energy all rose slightly last month compared to June. However, the cost of used cars and trucks fell 2.3% in July, marking the biggest monthly drop since January.
The Consumer Price Index (CPI) weighs the costs of goods based on their importance. Items like food, shelter and energy tend to be weighted more heavily.
U.S. President Joe Biden said the latest data shows that the economy continues to recover from record-high inflation the U.S. faced in mid-2022.
"Today’s report shows that we continue to make progress fighting inflation and lowering costs for American households," the president said in a statement. "Inflation has fallen below 3% and core inflation has fallen to the lowest level since April 2021. We have more work to do to lower costs for hardworking Americans, but we are making real progress, with wages rising faster than prices for 17 months in a row."
The positive report from the U.S. Bureau of Labor Statistics means the Federal Reserve could potentially slash interest rates during its meeting next month.
Interest rates have remained at their highest levels since early 2001 for the last 12 months — between 5.25% and 5.5%.
The Federal Reserve implemented a series of interest rate hikes in 2022 and 2023 to combat high inflation.
Chairman Jerome Powell has made it the Fed's goal to get inflation to an annualized rate of 2%.
