Consumer prices rose 0.2% in August as the annual inflation rate cooled

Consumer prices rose 0.2% in August, with core inflation higher than expected.

Prices increased as expected in August while the annual inflation rate declined to its lowest level since February 2021, according to a Labor Department report Wednesday. The report sets the stage for an expected quarter-percentage-point rate cut from the Federal Reserve in a week.

The consumer price index, a broad measure of goods and services costs across the U.S. economy, increased 0.2% for the month, in line with the Dow Jones consensus, the Bureau of Labor Statistics reported.

That put the 12-month inflation rate at 2.5%, down 0.4 percentage points from the July level, and compared to the estimate of 2.6%.

However, core CPI, which excludes volatile food and energy prices, increased by 0.3% for the month, slightly higher than the estimate of 0.2%. The 12-month core inflation rate was 3.2%, which aligns with the forecast.

While the numbers showed that inflation slowly continued to moderate, housing-related costs remain an issue. The shelter component of CPI, which has about a one-third weighting in the index, increased by 0.5%, accounting for much of the increase in the all-items measure. The shelter index was up 5.2% year over year.

Food prices rose just 0.1%, while energy costs slid 0.8%.

The report shows that used vehicle prices decreased by 1%, medical care services declined by 0.1%, and apparel prices increased by 0.3%.

Stock market futures moved lower following the report, though Treasury yields spiked.

In the Fed funds futures market, traders priced in an 85% chance that the Federal Open Market Committee will approve a quarter percentage point, or 25 basis point, interest rate reduction when its meeting concludes Sept. 18, according to the CME Group″s FedWatch measure.