Inflation falls below 3% for the first time since March 2021

Consumer prices rose 2.9% in the 12-month period through July, according to the Labor Department. reported Wednesday. For the first time in more than three years, the 12-month inflation rate, as measured by the consumer price index, fell below three percent. This could pave the way for the Federal Reserve to begin cutting interest rates at its September meeting.

On a monthly basis, prices rose by 0.2%. The core CPI rate, which excludes volatile food and fuel prices, was also 0.2% on a monthly basis and 3.2% on an annual basis – the lowest reading for this figure since April 2021.

The sharpest declines were in used car and truck prices, which fell 10.9 percent last year. A notable exception was housing costs, as housing costs rose 5.1 percent over the past 12 months and 0.4 percent from June to July.

The White House celebrated the good report. When asked by a reporter whether the US had “overcome” inflation, President Joe Biden replied: “Yes, yes, yes. I told you we were going to have a soft landing… My policy is working. Start writing like that, OK?”

Bharat Ramamurti, former deputy director of the National Economic Council in the Biden administration, noted that the CPI data comes shortly after reports showing that wholesale inflation is easing, as are consumer inflation expectations. “We have won the battle against inflation,” he wrote on X. “It's time for the Fed to start cutting rates.”

Wall Street analysts also rated the report positively. “Investors and policymakers will find this report overwhelmingly positive for the markets and the economy,” said Jeffrey Roach, chief economist at LPL Financial, per Bloomberg“If inflation subsides, the Fed may well lower interest rates but keep its overall policy restrictive.”

Sung Won Sohn, who teaches finance and economics at Loyola Marymount University, told CNN that the July report represents an important milestone. “Breaking the 3% mark is an important psychological advantage,” she said. said“It shows that not only is inflation trending downward, but that disinflation is also on track.”

At the White House, officials stressed that they are aware that despite easing inflation, high prices remain a problem that must be addressed. Jared Bernstein, chairman of the Council of Economic Advisers, said the administration would not do “victory laps” after the report. “Our work is not done, because even if we get inflation back to pre-pandemic levels, we still have to be aware that too many families are facing too high costs,” he told reporters.

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