A customer pushes her shopping cart through the aisles at a store in Los Angeles. File/Reuters

US consumer inflation eased slightly in July, according to government data published on Wednesday, its smallest 12-month increase since March 2021 and a positive sign for the Federal Reserve as it weighs cutting interest rates.

The consumer price index (CPI) rose 2.9 per cent last month from a year ago, the labour Department said in a statement, while a measure that strips out volatile food and energy costs cooled to an annual rate of 3.2 per cent.

This was slightly lower than the median forecast of economists surveyed by Dow Jones Newswires and The Wall Street Journal.

The monthly inflation rate picked up by 0.2 per cent after declining in June, in line with expectations.

Almost 90 per cent of the monthly increase was down to a 0.4 per cent increase in shelter costs, the labour Department said. Energy prices remained unchanged, while the index for food rose 0.2 per cent.

So-called “core” inflation, excluding volatile food and energy prices, also eased last month to 3.2 per cent -- its lowest level since April 2021.

The July CPI data are good news for US Federal Reserve as it weighs the right time to start bringing interest rates down from a 23-year high.

The US central bank has been attempting to lower inflation to its long-term target of two per cent without crashing the economy or causing a surge in the unemployment rate.

“Today’s report will raise confidence within the Fed that inflation is indeed on a sustainable path towards 2%,” economists at High Frequency Economics (HFE) wrote in a note to clients.

Fed chair Jerome Powell suggested last month that the policymakers could cut rates “as soon as” September, if the data continue to come in as expected. With futures traders overwhelmingly expecting the Fed to cut interest rates in September, according to data from CME Group, the question is how big its first cut will be.

Traders have assigned a probability of just over 55 per cent that it will make a quarter-percentage point cut.

Separately, leveraged loan deals are expected to pick back up after a stabilization in markets over the past week, although some investors say they are cautious about junk-rated loans if the economy weakens.

Borrowers pulled back on leveraged loan deals last week, following disappointing jobs data on Aug. 1 and Aug. 2 that raised forecasts for aggressive interest rate cuts and spurred concerns about lower-rated debt.

A total of six leveraged loans worth $3.3 billion sold last week, which falls well short of the $10 billion weekly average this year and is the worst week for issuance outside the holiday-shortened first week of July, according to PitchBook LCD data.

One junk-rated loan deal sold on Monday, airline JetBlue Airways’ five-year term loan, according to PitchBook LCD. JetBlue originally sought a $1.25 billion loan, but downsized it to $750 million and upsized its bond offering to $2 billion from $1.5 billion, according to Informa Global Markets. JetBlue did not immediately respond to a request for comment.

At least two leveraged loan deals hit the market on Tuesday, including a $160 million add-on to virtual dataroom Datasite’s cross-border term loan and a $253 million repricing of for-profit education operator Adtalem Global Education’s term loan, according to PitchBook. Datasite and Adtalem did not immediately respond to a request for comment.

Agencies