U.S. inflation rate reaches 3-year low but Long Island's rate remains higher as Fed prepares rate cuts
WASHINGTON — The post-pandemic spike in U.S. inflation eased further last month as year-over-year price increases reached a three-year low, clearing the way for the Federal Reserve to cut interest rates and likely shaping the economic debate in the final weeks of the presidential race.
Wednesday’s report from the Labor Department showed that consumer prices rose 2.5% in August from a year earlier, down from 2.9% in July. It was the fifth straight annual drop and the smallest since February 2021. From July to August, prices rose just 0.2%.
Excluding volatile food and energy costs, so-called core prices rose 3.2% in August from a year ago, the same as in July. On a month-to-month basis, core prices rose 0.3%, a slight pickup from July's 0.2% increase. Economists closely watch core prices, which typically provide a better read of future inflation trends.
"Today’s report will add to confidence within the Fed that inflation is indeed on a sustainable path towards 2%," the Fed's target level, Carl Weinberg, chief economist at High Frequency Economics, wrote in a note to clients.
Prices rose faster in the 25-county metropolitan area, which includes Long Island. Consumer prices increased 3.7% during the 12 months ending in August. While the pace of inflation in the region is substantially higher than in the nation as a whole, the annual inflation rate locally was the lowest it has been since March. Excluding the volatile food and energy categories, prices rose 4.4%.
One of the main drivers of the difference between national and local inflation rates has been fast-rising housing costs, including rents, in the metro area, said regional economist Bruce Bergman at the Bureau of Labor Statistics.
Housing costs, which also include spending on home energy and furnishings, rose 5.9% in the metropolitan area in August compared with a year ago. That compares with a 4.4% increase nationally.
The increase in housing costs is "not coming down as much or as quickly as it did nationally, Bergman said.
For months, cooling inflation has provided gradual relief to America’s consumers, who were stung by the price surges that erupted three years ago, particularly for food, gas, rent and other necessities. Inflation peaked in mid-2022 at 9.1%, the highest rate in four decades.
And Americans’ paychecks have risen steadily for the past three years. Overall incomes have even outpaced inflation for roughly the past 18 months, helping more households handle elevated prices. On Tuesday, the Census Bureau reported that the median inflation-adjusted household income rose 4% last year to above $80,000, essentially matching the 2019 peak.
Wednesday's inflation figures followed a presidential debate on Tuesday night in which former President Donald Trump attacked Vice President Kamala Harris for the price spikes that began a few months after the Biden-Harris administration took office, when global supply chains seized up and caused severe shortages of parts and labor.
During the debate, Trump falsely characterized the scope of the inflation surge when he claimed, "They had the highest inflation perhaps in the history of our country." Inflation reached 14.6% in 1980 — much higher than the 2022 peak.
In the metropolitan area, grocery prices increased 1% compared with the previous year, while the prices for food away from home rose 3.2%. The greatest increase among food categories was a 3.6% year-over-year increase in the index tracking meats, poultry, fish and eggs.
The regional index tracking energy prices dipped 0.1% compared with August 2023. Gas prices were 9.1% lower than a year ago, while household energy prices increased 5.3%.
The latest data on gas prices on Long Island from AAA showed an average price at the pump on Wednesday of $3.22 for regular unleaded gas compared with $3.79 a year ago.
Within household energy prices, electricity increased 9.1% and natural gas rose 3.4% compared with a year ago.
Fed officials, who are watching housing costs closely, expect them to cool more consistently. According to the real estate brokerage Redfin, the median rent for a new lease in the U.S. rose just 0.9% in August from a year earlier, to $1,645 a month. But the government’s measure includes all rents, including those for people who have been in their apartments for years. It takes time for the slowdown in new rents to show up in the government’s data. Last month, rental costs rose 5.2% from a year ago, according to the government’s consumer price index.
The Fed's policymakers have signaled that they’re increasingly confident that inflation is falling back to their 2% target and are now shifting their focus to supporting the job market, which is steadily cooling. As a result, they are poised to begin cutting their benchmark interest rate next week from its 23-year high in hopes of bolstering growth and hiring.
A modest quarter-point cut is widely expected. The pickup in core inflation makes it unlikely that the Fed would consider cutting its key rate by a larger-than-usual half-point next week, as some Wall Street traders had hoped.
Still, over time, a series of Fed rate cuts should reduce the cost of borrowing across the economy, including for mortgages, auto loans and credit cards.
In a high-profile speech last month, Fed Chair Jerome Powell noted that inflation was coming under control and suggested that the job market was unlikely to be a source of inflationary pressure.
With Jonathan LaMantia
WASHINGTON — The post-pandemic spike in U.S. inflation eased further last month as year-over-year price increases reached a three-year low, clearing the way for the Federal Reserve to cut interest rates and likely shaping the economic debate in the final weeks of the presidential race.
Wednesday’s report from the Labor Department showed that consumer prices rose 2.5% in August from a year earlier, down from 2.9% in July. It was the fifth straight annual drop and the smallest since February 2021. From July to August, prices rose just 0.2%.
Excluding volatile food and energy costs, so-called core prices rose 3.2% in August from a year ago, the same as in July. On a month-to-month basis, core prices rose 0.3%, a slight pickup from July's 0.2% increase. Economists closely watch core prices, which typically provide a better read of future inflation trends.
"Today’s report will add to confidence within the Fed that inflation is indeed on a sustainable path towards 2%," the Fed's target level, Carl Weinberg, chief economist at High Frequency Economics, wrote in a note to clients.
WHAT TO KNOW
- Consumer prices rose 2.5% in August from a year earlier, down from 2.9% in July, the Labor Department reported Wednesday. From July to August, prices rose 0.2%.
- Excluding volatile food and energy costs, so-called core prices rose 3.2% in August from a year ago, the same as in July.
- Prices rose faster in the 25-county metropolitan area, which includes Long Island. Consumer prices increased 3.7% during the 12 months ending in August. The annual inflation rate locally was the lowest it has been since March.
Prices rose faster in the 25-county metropolitan area, which includes Long Island. Consumer prices increased 3.7% during the 12 months ending in August. While the pace of inflation in the region is substantially higher than in the nation as a whole, the annual inflation rate locally was the lowest it has been since March. Excluding the volatile food and energy categories, prices rose 4.4%.
One of the main drivers of the difference between national and local inflation rates has been fast-rising housing costs, including rents, in the metro area, said regional economist Bruce Bergman at the Bureau of Labor Statistics.
Housing costs, which also include spending on home energy and furnishings, rose 5.9% in the metropolitan area in August compared with a year ago. That compares with a 4.4% increase nationally.
The increase in housing costs is "not coming down as much or as quickly as it did nationally, Bergman said.
For months, cooling inflation has provided gradual relief to America’s consumers, who were stung by the price surges that erupted three years ago, particularly for food, gas, rent and other necessities. Inflation peaked in mid-2022 at 9.1%, the highest rate in four decades.
And Americans’ paychecks have risen steadily for the past three years. Overall incomes have even outpaced inflation for roughly the past 18 months, helping more households handle elevated prices. On Tuesday, the Census Bureau reported that the median inflation-adjusted household income rose 4% last year to above $80,000, essentially matching the 2019 peak.
Wednesday's inflation figures followed a presidential debate on Tuesday night in which former President Donald Trump attacked Vice President Kamala Harris for the price spikes that began a few months after the Biden-Harris administration took office, when global supply chains seized up and caused severe shortages of parts and labor.
During the debate, Trump falsely characterized the scope of the inflation surge when he claimed, "They had the highest inflation perhaps in the history of our country." Inflation reached 14.6% in 1980 — much higher than the 2022 peak.
In the metropolitan area, grocery prices increased 1% compared with the previous year, while the prices for food away from home rose 3.2%. The greatest increase among food categories was a 3.6% year-over-year increase in the index tracking meats, poultry, fish and eggs.
The regional index tracking energy prices dipped 0.1% compared with August 2023. Gas prices were 9.1% lower than a year ago, while household energy prices increased 5.3%.
The latest data on gas prices on Long Island from AAA showed an average price at the pump on Wednesday of $3.22 for regular unleaded gas compared with $3.79 a year ago.
Within household energy prices, electricity increased 9.1% and natural gas rose 3.4% compared with a year ago.
Fed officials, who are watching housing costs closely, expect them to cool more consistently. According to the real estate brokerage Redfin, the median rent for a new lease in the U.S. rose just 0.9% in August from a year earlier, to $1,645 a month. But the government’s measure includes all rents, including those for people who have been in their apartments for years. It takes time for the slowdown in new rents to show up in the government’s data. Last month, rental costs rose 5.2% from a year ago, according to the government’s consumer price index.
The Fed's policymakers have signaled that they’re increasingly confident that inflation is falling back to their 2% target and are now shifting their focus to supporting the job market, which is steadily cooling. As a result, they are poised to begin cutting their benchmark interest rate next week from its 23-year high in hopes of bolstering growth and hiring.
A modest quarter-point cut is widely expected. The pickup in core inflation makes it unlikely that the Fed would consider cutting its key rate by a larger-than-usual half-point next week, as some Wall Street traders had hoped.
Still, over time, a series of Fed rate cuts should reduce the cost of borrowing across the economy, including for mortgages, auto loans and credit cards.
In a high-profile speech last month, Fed Chair Jerome Powell noted that inflation was coming under control and suggested that the job market was unlikely to be a source of inflationary pressure.
With Jonathan LaMantia
'We have to figure out what happened to these people' More than 100 women have been found dead outside on Long Island since 1976. NewsdayTV's Shari Einhorn and Newsday investigative reporter Sandra Peddie have this exclusive story.
'We have to figure out what happened to these people' More than 100 women have been found dead outside on Long Island since 1976. NewsdayTV's Shari Einhorn and Newsday investigative reporter Sandra Peddie have this exclusive story.