US Inflation Drops To Lowest Level In Three Years

A shopper considers rug samples near a display of furniture in a store on June 2, 2024, in Lone Tree, Colo. (AP Photo/David Zalubowski, File)

Inflation in the United States decreased to its lowest level in over three years, with consumer prices rising just 2.4% in September compared to a year earlier. This marks a decline from the 2.5% increase seen in August and is the smallest annual rise since February 2021. Core prices, which exclude volatile food and energy costs, remained elevated in September, driven by rising costs for medical care, clothing, auto insurance, and airline fares.

Despite the overall decrease in inflation, some items such as used cars may see price increases in the coming months, while others like clothing and airfares are expected to stabilize. The Federal Reserve is likely to continue cutting its benchmark interest rate this year, with two quarter-point reductions expected in November and December.

One positive development is the slower growth in apartment rental prices, indicating a cooling housing inflation trend. Additionally, food prices have risen by nearly 25% from pre-pandemic levels, impacting many Americans' budgets. However, there has been a recent drop in gas prices, while grocery prices saw a slight increase last month.

Core prices elevated due to rising costs in medical care, clothing, auto insurance, and airline fares.

US inflation at 2.4% in September, lowest in over three years.

Expected price increases in used cars, stabilization in clothing and airfares.

Overall, the improving inflation picture is complemented by a healthy job market and solid economic growth. The unemployment rate dropped to 4.1% in September, and the economy expanded at a 3% annual rate in the April-June quarter. These positive economic indicators could impact the presidential campaign, with Vice President Kamala Harris now on par with former President Donald Trump in terms of public opinion on handling the economy.

Looking ahead, economists project a further decline in core inflation by December 2024, with few expecting a surge unless there are significant escalations in conflicts in the Middle East. While higher prices have affected consumer sentiment, rising wages and incomes are outpacing costs, providing some relief to households. Incomes have risen 4% in 2023, returning to pre-pandemic levels, and Social Security beneficiaries will receive a 2.5% cost-of-living adjustment in January.