Inflation: September 2024

Eases in Pricing and Hiring Pressures Pave Way for First Steps Toward Lower Rates

Inflation cools to more than three-year low. Headline CPI increased 2.5 percent year over year in August — its smallest annual gain since February 2021. This slowdown is in part fueled by a 4.0 percent drop in energy prices. Removing that category along with food costs, the core CPI measure was up 3.2 percent from August 2023. While higher than headline inflation, the core metric was nevertheless below where it has been for nearly four years, aided by falling commodity prices and a tempering jump in the shelter index. Core PCE, the Federal Reserve’s preferred inflation measure with a smaller emphasis on shelter prices, was up 2.6 percent year over year in July and just 0.4 percent since May. If that recent pace was extrapolated for a whole year, the rate of inflation would fall short of the Fed’s 2.0 percent target.

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