WASHINGTON: US consumer inflation eased more than expected last month, according to government data published Wednesday, likely bolstering calls for the Federal Reserve to cut interest rates next week.

A rate cut by the independent US central bank would act to boost demand in the world’s largest economy. That would give the Democratic party some good economic news to run on going into the final stretch of the 2024 presidential elections.

The consumer price index (CPI) slowed to 2.5 percent in August from a year ago, down from 2.9 percent in July and the lowest annual figure since February 2021, the Labor Department said in a statement.

US Fed’s favored inflation measure cools further in June

This was slightly lower than the median forecast of economists surveyed by Dow Jones Newswires and The Wall Street Journal.

A measure of inflation that strips out volatile food and energy costs remained largely unchanged at an annual rate of 3.2 percent.

The monthly inflation rate picked up by 0.2 percent after declining in June, in line with expectations.

Alongside the ongoing slowdown in consumer inflation, the Fed’s favored inflation measure, known as the personal consumption expenditures price index (PCE), has also eased towards the bank’s long-term two percent target.

The labor market has also cooled.

Against this backdrop, Fed policymakers have shifted attention from inflation to the unemployment part of the bank’s dual mandate, and hinted at rate cuts to come.

Traders remain divided over whether the Fed will start with a quarter-percentage-point cut next week, or move ahead with a larger half-point cut instead.