US consumer prices fall in August

Posted by admin on 16 September, 2008 under Business news | Be the First to Comment

US consumer prices fell in August for the first time in nearly two years due to lower energy costs, data shows.

Labor Department figures showed the Consumer Price Index (CPI) was 0.1% lower month-on-month, and followed July’s 0.8% increase.

However on a yearly basis, prices were 5.4% higher.

The news comes as the US central bank meets to decide on interest rates, with some analysts saying the drop could make a rate cut more likely.

“If the Fed is thinking of cutting interest rates this afternoon, this gives them a little more freedom to do that,” said Robert McIntosh, lead economist at Eaton Vance.

It had been widely expected that the Federal Reserve would opt to leave interest rates on hold at 2%.

But in light of significant turmoil in the financial markets, and uncertainty over the health of the world’s largest economy, there are expectations that the central bank could lower rates.

The demise of Lehman Brothers and uncertainty over the future of insurance giant AIG, as well as the acquisition of Merrill Lynch by Bank of America have all added to market jitters.

News reported by The BBC