Higher core inflation dampens outsize Fed rate cut hopes

Overall CPI inflation eases to 3-year low of 2.5% in August

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Underlying US inflation unexpectedly picked up in August on higher prices for housing and travel, undercutting the chances of an outsize Federal Reserve interest-rate cut next week.

The so-called core consumer price index which excludes food and energy costs increased 0.3 per cent from July, the most in four months, and 3.2 per cent from a year ago, Bureau of Labor Statistics figures showed Wednesday. The three-month annualised rate advanced 2.1 per cent, picking up from 1.6 per cent in July, according to Bloomberg calculations.