US Inflation down setting up Fed cut

The inflation rate fell to 5.4% in August in the US, paving the way for a cut in interest rates later today by the Federal Reserve.

With oil prices droping by one-third over the past few months, it was a question as to whether the data would be captured in this report or the next. But, apparently, this report captured the data and this means that the Fed can comfortably cut interest rates this afternoon, knowing that inflation is on its way down. Month-on-month, the CPI Index was down 0.1% but the energy component was down a massive 3.1% and the transportation component 1.5%, offsetting gains in the price of food and clothing.

The market should be pretty happy about this number that in conjunction with Fed easing might be the magic elixir to support jittery financial markets around the globe. We’ll just have to wait and see.