The Fed monitors this inflation rate closely when setting interest rates. This is the lowest inflation rate since February 2021. This means that US consumer prices were 2.5% higher last month than they were in August 2023. For example, food prices were 2.1% more expensive than a year ago. Both the US Federal Reserve and the European Central Bank (ECB) target an inflation rate of around 2%. In response to the falling inflation rate, the US Federal Reserve (Fed) is expected to cut interest rates next week for the first time in several years. Low interest rates could increase the attractiveness of investment and stimulate the US economy. Stock market investors were still fearful of a US recession last month. They were concerned that the Fed had waited too long to cut interest rates. This fear triggered a major sell-off in global stock markets, with weak US labour and industry data exacerbating the concerns.
