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 that 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 point from the July level and compared to the estimate for 2.6%.

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

Elsewhere in the report, used vehicle prices decreased 1%, medical care services declined 0.1% and apparel prices increased 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.

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