A dual win for consumers: Inflation cooled last month, paving way for borrowing costs to come down more

Americans and Federal Reserve officials have news to celebrate: Inflation cooled significantly last month, likely giving central bankers more confidence to continue cutting interest rates.

The Fed’s favorite inflation gauge, the Personal Consumption Expenditures price index, showed consumers paid 2.2% more for goods and services for the year ended in August, versus 2.5% in July. This marks another step closer toward the Fed’s 2% inflation target.

The annual increase was below the 2.3% rate economists projected, according to FactSet consensus estimates. On a monthly basis, prices rose 0.1% in August versus the 0.2% increase in July, matching estimates.

That said, “core” inflation, which strips out volatile food and energy prices, rose last month to an annual pace of 2.7% from 2.6% in July. The acceleration was in line with what economists expected.

However, for the month, core inflation inched up by 0.1% in August from 0.2% in July. Economists forecast a 0.2% rise in core inflation last month.

This is a developing story and will be updated.