US consumer prices ease, but core inflation still sticky

STORY: U.S. inflation data released on Wednesday showed consumer prices easing overall, keeping the Federal Reserve on track to start cutting interest rates this month.

The Labor Department's consumer price index ticked up slightly in August.

Year-on-year, consumer prices rose 2.5%, the smallest annual rise since February 2021.

Grocery prices were unchanged from the prior month, while energy costs, including gasoline, electricity and natural gas, all dropped.

But the so-called core CPI, which excludes volatile food and energy prices, rose slightly more than expected.

That was mostly due to high rents and other housing costs, showing that underlying inflation remained sticky.

That could discourage the Federal Reserve from delivering a larger, half-point interest rate cut when the central bank holds its policy meeting next week.

The odds of a smaller quarter-point cut rose to 85%, jumping about 15% after the report's release, according to CME's FedWatch Tool.

The mixed inflation report followed data last week that showed the labor market was still cooling in an orderly fashion, helping to reduce the risk of inflation reigniting.