Inflation continues to provide positive news in the United States. The slowdown in the consumer price index (CPI) remains firm and erased four tenths in August to 2.5% over a year, the figure expected on the markets and the lowest level since spring 2021. For its part, the core CPI (excluding energy and food), more sticky in recent times and more closely watched, remained at 3.2% over a year last month, also as expected. These unsurprising inflation data are good for the Federal Reserve insofar as they certify the path to disinflation, but they do not help it resolve the big dilemma before its September meeting: to cut interest rates by 25 or 50 basis points.
The truth is that this CPI release came with a narrower focus on it. In recent years, data (such as nonfarm payrolls) have been a big catalyst for markets in anticipation of Fed moves, despite the central bank claiming to be paying more attention to the personal consumption deflator (PCE). However, the disinflation seen in recent months after the worrisome rebound earlier this year and the rapid deterioration in the labor market have led the Fed to focus more on employment again and thus talk of rate cuts. Therefore, barring a major surprise, CPI is unlikely to drive market prices lower.
