Inflation’s steady march lower continued Wednesday, with the Bureau of Labor Statistics reporting that consumer price growth slowed to 2.5% in August, the lowest measure since 2021.
Estimates were for an annual increase of 2.6%, down from 2.9% in July. Food price growth slowed to 2.1%, its lowest level since at least May 2021; while gasoline prices declined more than 10% year on year. According to AAA, the average cost of a gallon of gasoline is now $3.25, compared with $3.83 a year ago.
Though price growth is now within range of the Federal Reserve’s official 2% target, the sting of rapid price increases over the past four years lingers for many consumers. And the latest report showed “core” inflation, which excludes volatile food and energy prices, unexpectedly climbed 0.3% month on month thanks to rising housing costs.
Inflation was a flashpoint during Tuesday night’s presidential debate, when Republican presidential nominee Donald Trump called out his rival, Vice President Kamala Harris, and the Biden administration for presiding over the period of significant price growth, though he incorrectly stated it was the worst in U.S. history.
Harris did not address the inflation point directly besides noting that she helped pass the Inflation Reduction Act.
Instead, she mentioned that some economists have argued that Trump’s tariffs-based economic plan could end up reigniting inflation.
Since the onset of the Covid-19 pandemic in the spring of 2020, the average cost of a gallon of milk has climbed about $1, while a dozen eggs are up $1.50. In total, the overall consumer price index has climbed about 21%.
There’s been even less relief for food away from the kitchen table: According to data from the restaurant software management group Toast, diners are paying 4% to 5% more for everything from burgers to burritos in the second quarter of 2024 compared with the same quarter last year.
While everyday items are more expensive, it is housing costs that continue to put Americans most at risk of seeing their living standards fall. The Bureau of Labor Statistics’ measure of housing inflation has steadied at about a 5% annually, compared with food-cost growth, which has risen only about 1%.
Since the start of the pandemic, rents are up 25% nationwide on average. According to Zillow, the median monthly rent in the U.S. is now about $2,100 — and approximately $3,600 in New York and $2,800 in Los Angeles.
According to Princeton University’s Eviction Lab, which compiles notices from select regions and metros, evictions are exploding in places like Minneapolis-St. Paul, Las Vegas and Phoenix compared with pre-Covid averages — though they are down elsewhere.
And as the jobs market shows increasing signs of slowing, so too is homeowner financial health alongside that of renters.
“Mortgage delinquencies increased across all product types compared to this time last year,” Marina Walsh, vice president of industry analysis at the Mortgage Bankers Association, said last month.
“While delinquencies are still low by historical standards, the recent increase corresponds with a rising unemployment rate, which has historically been closely correlated with mortgage performance,” Walsh said.
The latest inflation report is likely to cement a 0.25% cut in the Federal Reserve’s key interest rate, currently at about 5.3%, later this month.
But experts say it will take some time for consumers to feel the impact of the lower interest rate — and the relatively small size of the cut means borrowing costs will still be somewhat elevated.
Some economists remain sanguine about the state of the U.S. economy. In a note last week, Torsten Slok, partner and chief economist at Apollo Global Management financial group, cited wage growth, consumer spending and GDP as all indicative of a “soft landing” for the economy in which unemployment and inflation are subdued.
“The bottom line is that the US economy is not in a recession, and there are no signs of a recession on the horizon,” Slok wrote.
But Sophia Kearney-Lederman, senior economist at FHN Financial group, told NBC News that many investors are now forecasting a “hard landing” based on jobs data that has been persistently weak.
While the Fed is now widely expected to cut interest rates, a cut of just 0.25% may not be enough to stave off that scenario.
Instead, investors will be looking to Fed Chair Jerome Powell’s remarks announcing the central bank’s latest move to learn whether the Fed believes the economy is weaker than feared — and that more and steeper cuts could be necessary.
“I do think what will be more important than the first cut is the pace they go at,” Kearney-Lederman said.
