WASHINGTON: US central bankers will likely start long-awaited interest-rate cuts next week with a quarter-of-a-percentage-point reduction, as stubbornly intact underlying price pressures put them off more aggressive action.

Traders now see just a 15% chance of a half-point rate cut at the Fed’s Sept. 17-18 policy-setting meeting, down from about 29% before the report that showed the consumer price index rose 2.5% in August from a year earlier, down from July’s 2.9% increase.

Excluding volatile food and energy, prices rose 3.2%. Shelter costs, where gains had been moderating in recent months, accelerated year-over-year for the first time since March 2023.

Economists look at so-called core inflation to get a sense of the trajectory of prices.

“I don’t know if it’s a blip, but this report shows core inflation is still a question mark,” said Peter Cardillo, chief market economist at Spartan Capital Securities. “It probably seals a quarter percentage point rate cut from the Fed.”

Fed policymakers have kept the policy rate in the 5.25%-5.50% range since July of last year to keep downward pressure on inflation and get it on track to their 2% target. Nearly all of them say they want to dial that back soon to keep from slowing the labor market too much.