August US CPI Report: Inflation Slows to a 2.5% Annual Rate

The Bureau of Labor Statistics reported that the Consumer Price Index increased 2.5% in August from year-ago levels—a decrease from July’s 2.9% rate. Core CPI, which excludes volatile food and energy costs, rose 3.2% in August over the last 12 months after rising 3.2% in July.

The CPI increased 0.2% in August from month-ago levels, as in July. Core CPI increased 0.3% after rising 0.2% in July.

Economists had anticipated that the CPI inflation would rise 0.2% in August, according to FactSet’s consensus estimates. Annual inflation had been forecast to come down to a 2.6% rate. Core CPI inflation was forecast to increase 0.2% in August and 3.2% on an annual basis.

August CPI Report Key Stats

• CPI rose 0.2% for the month, as it did in July.
• Core CPI climbed 0.3% after rising by 0.2% in July.
• CPI rose 2.5% year over year after rising by 2.9% the prior month.
• Core CPI rose 3.2% from year-ago levels after rising 3.2% in July.

Food prices increased 0.1% in August after growing 0.2% in July. Food-at-home prices stayed the same over the month, while food-away-from-home (restaurant) prices increased 0.3%.

Energy prices declined over the month, down 0.8% overall after holding steady the prior month. Utility (piped) gas service prices fell 1.9%, fuel oil prices fell 1.9%, gasoline prices declined 0.6%, and electricity prices fell 0.7%.

In August, shelter prices increased 0.5% after rising 0.4% in July.

With the release of the August CPI report, attention now turns to the Federal Reserve’s two-day policy meeting next week. Investors are widely expecting the central bank to cut interest rates for the first since it began its aggressive campaign to stamp our surging inflation with tighter monetary policy in March 2022.

In the markets, the debate has been over how much the Fed will cut rates. Some in the bond market had been looking for the central bank to take an aggressive stance and lower its rate target by half a percentage point from its current 5.25%-5.50% range. But investors now appear to be leaning toward a quarter-point cut when the decision is announced next Wednesday afternoon.