CNN
—

Inflation is increasingly losing its grip on American consumers. Price increases have slowed to the extent they have not in three and a half years. This means that an interest rate cut of a quarter of a percentage point at the Federal Reserve’s meeting next week is virtually certain.

The consumer price index, a measure of price changes in a commonly purchased basket of goods and services, fell to 2.5 percent in August from 2.9 percent in July, according to Bureau of Labor Statistics data released Wednesday. That’s the lowest level since February 2021 and in line with the 2018 average.

On a monthly basis, prices rose by 0.2 percent, remaining unchanged from July.

Economists last month expected the annual rate to slow significantly to 2.6% per year, according to FactSet. This is partly due to favorable year-on-year comparisons: Last summer’s surge in gas prices caused inflation to soar in August 2023.

Falling gas prices helped reduce headline inflation in August, which fell by 0.6 percent month-on-month and by 10.3 percent year-on-year.

Food prices remained unchanged throughout the month and overall food inflation rose 0.1% in August and 2.1% year-on-year.

Excluding the typically volatile food and energy categories, the core CPI index rose 0.3 percent since July, a faster-than-expected increase that kept the annual rate at 3.2 percent.

Economists had forecast that core inflation would rise by 0.2 percent in the year to August and remain at 3.2 percent.

The cost of owning and renting a home continued to be the main driver of inflation, the BLS noted in the report. The housing index rose 0.5% for the month and was the “major factor” in the overall increase. On an annual basis, it is up 5.2% and accounts for more than 70% of the annual increase in the core CPI.

This story is evolving and will be updated.