NEW YORK: Forecasters expect a monthly report on US consumer prices to show another month of muted increases, possibly playing into a Federal Reserve (Fed) debate over how much to cut interest rates.

The figures by the Bureau of Labour Statistics will probably show the consumer price index (CPI) and a “core” gauge excluding food and energy both rose 0.2% in August following similar advances in July, according to the median estimates in a Bloomberg survey.

That would represent a 3.2% gain on an annual basis for the core measure - a third of where the rate was two years ago.

Increases of that magnitude would likely keep Fed officials leaning toward a quarter-point rate cut at next week’s policy meeting, though downside surprises would probably boost investor bets on a half-point reduction.

“Inflation data are quickly taking a backseat to labour market data in terms of relevance for Fed policy decisions, but with an inconclusive August employment report, August CPI data could be impactful,” Citigroup Inc economists Veronica Clark and Andrew Hollenhorst said in a Sept 9 report previewing the numbers.

“Given building downside risks to the labour market and activity, the bar for a soft-enough CPI reading to price a larger start to rate cuts could be low,” they wrote.

 - Bloomberg