Consumer prices rose 0.2 percent in July following two straight months of flat or declining prices, the Labor Department reported Wednesday.
The consumer price index (CPI) also slowed to a 2.9 percent annual increase in July, down from 3 percent in June, falling below 3 percent for the first time since March 2021.
The latest inflation reading comes as the Federal Reserve gears up for long-awaited interest rate cuts ahead of the upcoming election, and at a moment of economic anxiety as the unemployment rate has started to tick up.
Borrowing costs have remained at a 23-year high since last July, when the Federal Open Market Committee (FOMC) hiked rates to a range of 5.25 percent to 5.5 percent.
The committee has voted to keep rates at the current range at each subsequent meeting, and hopes that it would vote to ease monetary policy earlier in 2024 were dashed by an uptick in inflation this spring.
But as the unemployment rate has ticked higher and the actual number of jobs added to the economy has been revised down, concerns about a potential recession have resurfaced.
Following the longest streak of a sub-4 percent unemployment rate since the 1960s, the jobless rate jumped to 4.3 percent last month, from 4.1 percent in June. That’s the highest unemployment rate since October 2021.
Now a majority of interest rate traders expect not one but two cuts when the FOMC meets again in September, according to the CME FedWatch rate forecaster.
The September meeting will be the last before the general election. While Fed Chair Jerome Powell has repeatedly asserted that the central bank is an independent body that makes decisions based on economic data, not politics, the timing puts Powell in the crosshairs of Democrats and Republicans alike.
Former President Trump appointed Powell in 2017 but almost immediately began to clash with the lifelong Republican when the Fed started raising interest rates during his first term.
While Trump has recently said he would let Powell finish out his term, which ends in 2026, he warned the Fed against interest rate cuts, which would likely stimulate the economy and send the stock market soaring, before the election.
“It’s something that they know they shouldn’t be doing,” Trump said in a Bloomberg interview.
On the other side of the aisle, some Democrats have called on the central bank to cut interest rates they say are exacerbating the affordable housing crisis, ballooning consumer loan costs and risking jobs.