Inflation rate decreased to its lowest point since early 2021, while consumer prices increased by 0.2% in August.

The Labor Department report on Wednesday revealed that prices rose as anticipated in August, but the annual inflation rate fell to its lowest level since February 2021, paving the way for a possible quarter percentage point rate cut from the Federal Reserve in a week.

The Bureau of Labor Statistics reported that the consumer price index, which measures the cost of goods and services across the U.S. economy, rose 0.2% for the month, in accordance with the Dow Jones consensus.

The 12-month inflation rate decreased by 0.4 percentage point from July to 2.5%, which is lower than the estimated 2.6%.

The 12-month core inflation rate was 3.2%, which is in line with the forecast, despite the fact that core CPI, which excludes volatile food and energy prices, increased 0.3% for the month, slightly higher than the 0.2% estimate.

Although inflation has gradually decreased, housing-related expenses remain a significant concern. The shelter component of CPI, which accounts for one-third of the index, increased by 0.5%, contributing significantly to the rise in the all-items measure. The shelter index increased by 5.2% year over year.

Food prices rose just 0.1%, while energy costs slid 0.8%.

In the report, it is stated that used vehicle prices decreased by 1%, medical care services declined by 0.1%, and apparel prices increased by 0.3%.

Stock market futures moved lower following the report though Treasury yields spiked.

The CME Group's FedWatch measure indicates that traders expect a 25 basis point interest rate reduction to be approved by the Federal Open Market Committee at its meeting on Sept. 18, with an 85% chance of occurrence.

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