The August CPI data could provide clues as to whether the US Federal Reserve is normalising monetary policy, although the Fed's preferred variable for monitoring the cost of living is the personal consumption expenditure price index.

The US consumer price index (CPI) rose 2.5% year-on-year in August, down four-tenths of a point from the previous year and the lowest figure since February 2021, the Department of Labor's Bureau of Labor Statistics reported on Wednesday.

The underlying index, which excludes food and energy prices from its calculation due to their greater volatility, closed the eighth month of 2024 with an increase of 3.2%, unchanged and the lowest mark since April 2021.

Food prices rose 2.1% year-on-year, while energy prices were 4% cheaper in August than they were 12 months earlier.

In the monthly reading, the general rate of the index rose by 0.2%, the same figure as in July, while the underlying rate rose by one-tenth and advanced by 0.3%.

Markets are keeping an eye on the August data as it could provide clues as to whether the US Federal Reserve (Fed) will normalise monetary policy, although the Fed's preferred variable for monitoring the cost of living is the personal consumption expenditure (PCE) price index.

MONETARY POLICY

The Federal Open Market Committee (FOMC) of the Fed decided at the end of July to keep interest rates in the target range of between 5.25% and 5.5%, the highest since January 2001.

In its statement, the committee stressed that in considering any adjustment to the federal funds rate, the Committee would carefully assess incoming data, the evolving outlook, and the balance of risks.

"The Committee does not expect it to be appropriate to reduce the target range until it has gained greater confidence that inflation is moving steadily toward 2 percent," it said.

However, the US central bank stressed that inflation had decreased over the past year and acknowledged "progress" in recent months, but also that inflation remained "somewhat high."

The FOMC indicated that risks to achieving its employment and inflation goals had moved into better balance, although it warned that the economic outlook was "uncertain" and that it remained closely monitoring risks to both inflation and employment.

The next two-day FOMC meeting, and its subsequent interest rate announcement, will be on Wednesday, September 18.