Like the PPI reported yesterday, August's consumer price index (CPI) showed tame inflationary pressures, which could boost the chance for future rate cuts. Last month, the CPI edged 0.1% lower, marking the reading's first decline since October 2006. Economists were expecting the index to be unchanged. The core CPI, which leaves food and energy prices out of the equation, rose 0.2%, matching estimates.

Energy prices dropped 3.2% last month compared to July, with gasoline prices losing 4.9%. Electricity prices were unchanged. On the flip side, food prices were marginally higher, up 0.4% during the month. Elsewhere, clothing prices dropped 0.5% across the board and medical-care prices rose half a percentage point. Housing costs which comprise 40% of the CPI index were flat. Rent edged up 0.2%, and lodging away from the primary home dropped 0.6%.

Overall consumer inflation rose 2% on a year-over-year basis, with the core CPI gaining 2.1% compared to the same month a year ago. This is the core index's smallest year-over-year advance since September 2005. The Federal Reserve ostensibly has a comfort zone that tops out around the 2% mark.

In other economic news, the Labor Department noted that the average weekly earnings for U.S. workers (when adjusted for inflation) rose 0.5% last month. Average hourly earnings rose 0.3%, and average weekly hours themselves were flat.

Finally, housing starts dropped 2.6% in August to a seasonally adjusted annual rate of 1.331 million, the lowest level of starts since June 1995. But analysts were expecting an even wider decline of 3.7% to 1.330 million. This follows a 6.9% plunge in July, which was revised from the previously reported 6.1% drop. Building permits tumbled 5.9% last month, broader than the 3.4% decline expected on the Street.