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Key U.S. inflation gauge shows prices cooled in August, raising likelihood of more rate cuts
The Federal Reserve’s preferred inflation measure on Friday provided the latest sign that price pressures are easing, a trend that is expected to fuel further Fed interest rate cuts this year and next.
Prices rose just 0.1% from July to August, the Commerce Department said, down from the previous month’s 0.2% increase. Compared with a year earlier, inflation fell to 2.2%, down from 2.5% in July and barely above the Fed’s 2% inflation target.
The cooling of inflation might be eroding former President Donald Trump’s polling advantage on the economy. In a survey last week by The Associated Press-NORC Center for Public Affairs Research, respondents were nearly equally split on whether Trump or Vice President Kamala Harris would do a better job on the economy. That is a significant shift from when President Joe Biden was still in the race, when about six in 10 Americans disapproved of his handling of the economy. The shift suggests that Harris could be shedding some of Biden’s baggage on the economy as sentiment among consumers begins to brighten.
Grocery costs barely rose last month, according to Friday’s report, and energy costs dropped 0.8%, led by cheaper gasoline.
Excluding volatile food and energy costs, so-called core prices rose just 0.1% from July to August, also down from the previous month’s 0.2% increase. It was the fourth straight time that monthly price increases have fallen below an annual rate of 2%, the Fed’s target. Compared with 12 months earlier, core prices rose 2.7% in August, slightly higher than in July.
“Sticky inflation is yesterday’s problem,” Samuel Tombs, chief U.S. economist at Pantheon Macroeconomics, said in a research note.
With inflation having tumbled from its 2022 peak to barely above the Fed’s 2% target, the central bank last week cut its benchmark interest rate by an unusually large half-point, a dramatic shift after more than two years of high rates. The policymakers also signaled that they expect to reduce their key rate by an additional half-point in November and in December. And they envision four more rate cuts in 2025 and two in 2026.
The ongoing decline in inflation makes it even more likely that the Fed will cut its key benchmark rate further in the coming months.
“From the Fed’s perspective, cumulatively, we think the data show enough progress on key inflation metrics for policymakers to continue cutting rates,” said Carl B. Weinberg, chief economist; and Rubeela Farooqi, chief U.S. economist at High Frequency Economics in a Friday research note. “The softer-than expected nominal spending and income results give them incentive to continue easing.”
On Thursday, Tom Barkin, president of the Federal Reserve Bank of Richmond, expressed support for a cautious approach to rate cuts. In an interview with The Associated Press, he said he favors reducing the Fed’s key rate “somewhat.” But Barkin said he wants to ensure that inflation keeps cooling before cutting the benchmark rate to a level that would no longer restrain the economy.
Tepid consumer spending
Friday’s report also showed that Americans’ incomes and spending ticked up only slightly last month, with both rising just 0.2%. Still, those tepid increases coincide with upward revisions this week for income and spending figures from last year. Those revisions showed that consumers were in better financial shape, on average, than had been previously reported.
“Consumer spending was a touch softer than expected, mostly due to relatively weak goods spending,” Olu Sonola, head of U.S. economic research at Fitch Ratings. “All things considered, this month’s report does not nudge the Fed in the direction of another forceful 50 bps cut in November. Two 25 bps cuts still seem more likely in November and December.”
Americans also saved more of their incomes in recent months, according to the revisions, leaving the savings rate at 4.8% in September, after previous figures had shown it falling below 3%.
The government reported Thursday that the economy expanded at a healthy 3% annual pace in the April-June quarter. And it said economic growth was higher than it had previously estimated for most of the 2018-through-2023 period.
The Fed tends to favor the inflation gauge that the government issued Friday — the personal consumption expenditures price index — over the better-known consumer price index. The PCE index tries to account for changes in how people shop when inflation jumps. It can capture, for example, when consumers switch from pricier national brands to cheaper store brands.
In general, the PCE index tends to show a lower inflation rate than CPI. In part, that’s because rents, which have been high, carry double the weight in the CPI that they do in the index released Friday.
Recent reports suggest that the economy is still expanding at a healthy pace. On Thursday, the government confirmed its previous estimate that the U.S. economy grew at a healthy 3% annual pace from April through June, boosted by strong consumer spending and business investment.
Several individual barometers of the economy have been reassuring as well. Last week, the number of Americans applying for unemployment benefits fell to its lowest level in four months.
And last month, Americans increased their spending at retailers, suggesting that consumers are still able and willing to spend more despite the cumulative impact of three years of excess inflation and high borrowing rates.
The nation’s industrial production rebounded, too. The pace of single-family-home construction rose sharply from the pace a year earlier. And this month, consumer sentiment rose for a third straight month, according to preliminary figures from the University of Michigan. The brighter outlook was driven by “more favorable prices as perceived by consumers” for cars, appliances, furniture and other long-lasting goods.
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Washington — The Supreme Court on Friday rejected a bid by independent presidential Robert F. Kennedy Jr. to restore his name to New York’s general election ballot.
The unsigned order from the court leaves intact a lower court decision declining to place his name back on New York’s ballot ahead of the Nov. 5 contest. Kennedy mounted an unsuccessful independent bid for the White House and, after suspending his campaign last month, is working to have his name removed from ballots in more than a dozen states.
He has since endorsed former President Donald Trump, the Republican nominee.
Kennedy asked the high court in an emergency appeal this week to reinstate his name in the Empire State, arguing that his supporters “have a constitutional right to have Kennedy placed on the ballot — and to vote for him, whether he is campaigning for their vote or not.”
“Whatever inconvenience the [state] may have in adding Kennedy to the ballot seven weeks before the election, it seems inconceivable that those difficulties or expenses could outweigh the constitutional rights of 108,417 New York voters,” his campaign told the court in its request for emergency relief.
Chip Somodevilla/Getty Images
The dispute arose after Kennedy collected more than 120,000 signatures to appear on New York’s ballot. The signatures were submitted to the state elections board in May, which went on to certify their validity and vote to place Kennedy on the ballot.
But several individuals filed a lawsuit in state court challenging Kennedy’s nominating petition. A state court and appeals court both ordered the board to keep Kennedy off the ballot on the grounds that his nominating petition listed an invalid address for the presidential hopeful. State law requires a nominating petition to show the candidates “place of residence” which is defined as their “fixed, permanent and principal home.”
The address in Katonah, New York, that Kennedy listed on his petition belongs to a friend, whom he paid $500 a month beginning in May for a room that he and the friend both say he has stayed in just once.
Kennedy said in a sworn declaration filed with a federal court in New York that he is registered to vote in the state and “for consistency purposes” was advised by his election law counsel to use the Katonah address on the nominating petition and other state petitions requiring a residence.
But the state appeals court concluded that the Katonah address wasn’t Kennedy’s “fixed” or “permanent” home, and determined he never lived there. New York’s top court, the Court of Appeals, declined to review the lower court’s decision.
While the state court proceedings were underway, Kennedy’s campaign challenged his exclusion from New York’s ballot in federal court, claiming the state’s residence requirement is unconstitutional. A district judge and the U.S. Court of Appeals for the 2nd Circuit, however, declined the campaign’s request to restore Kennedy to the ballot.
The Board of Elections issued a certification of New York’s general election ballot on Sept. 11 that omitted Kennedy from it.
Kennedy, the son of the late Robert F. Kennedy and nephew of John F. Kennedy, argued in a filing with the Supreme Court that the address on his nominating petition is “entirely immaterial” to voters and to New York, and said the residence requirement is not related to a qualification to run for the presidency.
His campaign also argued that disclosing a “controversial” public figure’s home address puts him and his family at risk.
“It can result in round-the-clock demonstrations outside his house, attacks on his home, and harassment of his family, including his children,” Kennedy’s campaign argued. “This is a severe burden to impose on a presidential candidate on pain of exclusion from the ballot.”
The Board of Elections urged the Supreme Court to reject Kennedy’s request, noting that not only has the ballot certification deadline already passed, but so has a federal deadline for mailing ballots to overseas and military voters, which was Sept. 21.
“The requested injunction would not only severely disrupt the state’s election processes and trigger substantial voter confusion, but also cause New York to miss federal deadlines for mailing overseas and military ballots and potentially disenfranchise voters who receive and vote the original ballot,” state officials wrote in a Supreme Court filing.
They also noted that Kennedy has already called off his own presidential campaign, endorsed Trump and is in court in other states to remove his name from their ballots.
“Kennedy’s purported concern for his petition signers’ rights is highly questionable given his attempts to remove his name from the ballots in other states,” New York officials said. “Meanwhile, voters who may not be aware of Kennedy’s suspension of his candidacy may be misled by his presence on the ballot into thinking that he remains a bona fide candidate for the presidency.”
Kennedy’s suspension of his campaign came after months of fighting to get on the ballot in every state and Washington, D.C. At the time, he said he would seek to have his name removed from the ballots in 10 states that his campaign considered competitive because it risked harming Trump’s chances of winning the election against Vice President Kamala Harris. He also endorsed Trump, but said his supporters should still vote for him in states where it would not be to the detriment of the Republican nominee.
But Kennedy later encouraged his supporters in every state to vote for Trump and has sought to remove his name from the ballot in more states than the original 10. According to CBS News’ latest tally, Kennedy’s name won’t appear on the ballot in 18 states.
His campaign website now declares “a vote for Trump is a vote for Kennedy.”
In August, a Georgia judge determined Kennedy was “not qualified” to appear on the state’s ballot, citing questions about his New York residency. Georgia was one of the 10 states where Kennedy wanted his name removed from the ballot and he did not challenge the decision.
While he fights to have his name reinstated in New York, he’s waging a separate battle in Michigan to have his name removed. The Michigan Supreme Court ruled in September to keep him on the ballot. He has appealed to the U.S. Court of Appeals for the 6th Circuit.
Kennedy’s request for relief is the third involving the 2024 election to land before the Supreme Court, though more are expected. The justices in August revived part of an Arizona law requiring documentary proof of citizenship when registering to vote using a state-created form, but declined to allow enforcement of provisions mandating such proof in order to vote for president or by mail.
Earlier this month, it rejected a bid to put Green Party presidential candidate Jill Stein on the Nevada general election ballot.
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