US inflation increased by less than expected in July; CPI rose 2.9% annually

Investing.com -- U.S. consumer prices increased by less than expected on an annualized basis in July, increasing the likelihood that the Federal Reserve will start cutting interest rates at its next meeting in September.

The Labor Department's consumer price index (CPI) rose by 2.9% last month, decelerating slightly from 3.0% in June. Economists had predicted that the figure would match June's rate.

Month-on-month, the reading climbed to 0.2% after actually falling 0.1% last month, matching expectations.

Stripping out more volatile items like food and fuel, the "core" number climbed by 3.2% in the twelve months to July, below projections of 3.3%. On a monthly basis, underlying price growth inched up to 0.2%, after rising 0.1% in June.

This release followed Tuesday’s cooler-than-expected July producer price index, and confirms the generally benign inflationary pressures, which could allow the U.S. central bank to cut its policy rate from the 5.25%-5.50% range it has been in for more than a year.

Federal Reserve Chair Jerome Powell has emphasized that favorable inflation data is crucial for a September rate cut.

Additionally, the payrolls report at the start of the month showed that U.S. jobs growth slowed more than expected in July, while the unemployment rate increased to 4.3%, which could heighten fears that the labor market is deteriorating and potentially making the economy vulnerable to a recession.