US inflation falls to three-year low

Annual US inflation came in at 2.9% in July, the lowest level since March 2021, according to numbers released Wednesday. The news will bolster the case for the US Federal Reserve to cut interest rates at its next meeting in September, and could provide a boost for Vice President Kamala Harris’ presidential campaign.

A closer look: Annual core inflation — which strips out volatile energy and food costs — fell from from 3.3 to 3.2 since June, suggesting pandemic-era supply constraints continue to ease. Grocery prices rose only 1.1% and gas prices fell 2.2% over the past year.

These trends mirror what’s happening north of the border, where falling inflation allowed the Bank of Canada to begin cutting rates this summer for the first time in four years.

The political impact: Falling inflation should in principle be good news for American Democrats and Canadian Liberals, since incumbents are typically held to account for economic perceptions. That said, Justin Trudeau’s polling numbers are so bad right now it’s hard to see what, if anything, could temper the negative vibes around him.

For Kamala Harris, meanwhile, the numbers provide a fresh tailwind as she flies into North Carolina for her economic policy rollout speech on Friday.