Inflation in the US is cooling faster than expected, stimulating consumers

Inflation in the US is cooling faster than expected, stimulating consumers
Inflation in the US is cooling faster than expected, stimulating consumers

Consumer prices continue to fall. June data shows that inflation in the US is easing again. unexpectedly high measured values earlier this year. The new report could help bolster the case for a Federal Reserve rate cut in September.

Consumer prices fell 0.1% in June from May, with inflation held back by lower gasoline prices and a smaller increase in grocery costs. On an annual basis, inflation was 3.0%, down from 3.3% in May, suggesting that inflation is cooling faster than expected, as economists surveyed by FactSet had forecast a 3.1% increase.

The reading is the lowest since June 2023, when prices also rose at an annual rate of 3%.

Cheddar cheese is one of the foods that costs less today than it will in 2023 and 2022, according to the CBS News Price Trackerwith the average price per pound being $5.54, compared to $5.68 last year and $5.78 the year before.

Fed Chairman Jerome Powell on Wednesday signaled “significant progress” in moderating inflation to the central bank’s 2% target. Still, he stressed that the central bank needed to see “more good data” to have confidence in cutting its benchmark interest rate, which currently stands at a two-decade high of 5.3% and has made it more expensive for consumers and businesses to borrow money through mortgages and other loans.

“A further slowdown in the price decline combined with a weakening labor market conditions argues for a change in the Fed’s message at the July FOMC meeting and opens the door for rate cuts as early as the September meeting,” said Rubeela Rarooqi, chief U.S. economist at High Frequency Economics, in a research note Thursday.

The latest inflation report signals that inflation is “declining sustainably to 2%,” said Olu Sonola, head of U.S. economic research at Fitch Ratings. “There is more and more confidence to start cutting rates, but the Fed will likely want to see similar numbers in August and September before making the first rate cut.”

Gasoline prices fell 3.8 percent in June, after falling 3.6 percent in May, more than offsetting higher housing costs, according to figures released Thursday by the Bureau of Labor Statistics. Grocery prices rose 0.2 percent in June.

The core CPI – excluding fluctuating food and energy costs – rose by 0.1%.

The S&P 500 traded near record highs following the report, while U.S. Treasury yields fell.


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