Fed’s favored inflation gauge shows cooling price pressures, clearing way for more rate cuts

WASHINGTON (AP) — The Federal Reserve’s preferred inflation measure on Friday provided the latest sign that price pressures are easing, a trend that is expected to fuel further Fed interest rate cuts this year and next.

Prices rose just 0.1% from July to August, the Commerce Department said, down from the previous month’s 0.2% increase. Compared with a year earlier, inflation fell to 2.2%, down from 2.5% the previous month and barely above the Fed’s 2% inflation target.

The cooling of inflation might be helping to erode former President Donald Trump’s polling advantage on the economy. In a survey last week by The Associated Press-NORC Center for Public Affairs Research, respondents were nearly equally split on whether Trump or Vice President Kamala Harris would do a better job on the economy. That is a significant shift from when President Joe Biden was still in the race, when about six in 10 Americans disapproved of his handling of the economy.

The shift suggests that Harris might be shedding some of Biden’s baggage on the economy as sentiment among consumers begins to brighten.

Excluding volatile food and energy costs, so-called core prices rose just 0.1% from July to August, also down from the previous month’s 0.2% increase. Compared with 12 months earlier, core prices rose 2.7% in August, slightly higher than in July.

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