The latest data released by the Commerce Department reveals that the Federal Reserve’s preferred inflation measure shows a slight increase of 0.1% from July to August. This uptick, although modest, is lower than the previous month’s 0.2% rise. Year-over-year, inflation has decreased to 2.2% in August, down from 2.5% the previous month, hovering just above the Fed’s target of 2% inflation rate.
This diminishing inflation trend is anticipated to contribute to further interest rate cuts by the Federal Reserve throughout this year and the next. The recent half-point decrease in the benchmark interest rate by the Federal Reserve, following a period of elevated rates, indicates a significant shift in monetary policy to address the easing price pressures.
A noteworthy consequence of the declining inflation is its potential influence on former President Donald Trump’s economic standing. Recent surveys, such as the one conducted by The Associated Press-NORC Center for Public Affairs Research, demonstrate a shift in public opinion regarding Trump and Vice President Kamala Harris’ economic competency. Respondents are now divided on who would handle the economy better, marking a departure from earlier sentiment during President Joe Biden’s candidacy.
It appears that Vice President Harris may be detaching herself from some of the economic criticisms associated with Biden, as consumer confidence shows signs of improvement. Core prices, excluding volatile food and energy costs, only rose by 0.1% from July to August, aligning with the overall lower inflation rates observed in this period.
Looking ahead, the Federal Reserve’s plans to reduce the key interest rate by an additional half-point in November and December, with further cuts expected in 2025 and 2026, reflect a proactive approach to stabilize inflation and support economic growth amidst changing market conditions.
