Fed's Inflation Gauge Shows Easing Price Pressures for Rate Cuts

The Federal Reserve's preferred inflation measure indicated a decrease in price pressures, with inflation falling to 2.2% in August, down from 2.5% in July. This marks a significant change from earlier in President Biden's term when public disapproval of his economic management was high. Core prices, excluding food and energy, rose only 0.1% from July to August, continuing a trend of monthly increases below the Fed's 2% target. The Fed recently cut its benchmark interest rate by half a point, signaling a shift after two years of high rates, and anticipates further cuts in the coming years. Additionally, Americans' incomes and spending saw slight increases of 0.2%, with upward revisions indicating better financial health than previously reported. The personal consumption expenditures price index, favored by the Fed, tends to show lower inflation rates compared to the consumer price index, partly due to the different weight given to rents. Overall, the economy appears to be expanding at a healthy pace, suggesting a positive outlook for consumers and potential for continued rate cuts by the Fed.