U.S. consumer prices unexpectedly fell in June, with the annual increase being the lowest in a year. which reinforced the view that the disinflationary trend is back on track and brings the Federal Reserve one step closer to reducing interest rates.
The Consumer Price Index, or CPI, fell 0.1% last month after remaining unchanged in May, the Department of Labor’s Bureau of Labor Statistics said Thursday.It was the second straight month of subdued CPI readings and could help bolster confidence among Fed officials that inflation is cooling.
In the 12 months through June, the CPI rose to 3%, after advancing to 3.3% in May. Economists polled by Reuters had expected a rise of 0.1 percent and 3.1 percent year-on-year.
The annual increase in consumer prices has slowed from a peak of 9.1% in June 2022. The personal consumption expenditures (PCE) price index rose 2.6% in May.
The CPI report followed news last week that the unemployment rate rose to a two-and-a-half-year high of 4.1% in June from 4% in May.
Economic growth has also slowed in response to sharp central bank rate hikes in 2022 and 2023, with a second-quarter GDP forecast close to the 1.8% annualized rate that authorities consider the non-inflationary growth rate.
Fed Chairman Jerome Powell acknowledged the recent trend toward improving price pressures, but told lawmakers this week that he is not yet ready to declare inflation had been surpassed and that “more good data will strengthen” the arguments in favor of rate cuts.
The cooling labor market and slowing economy have left financial markets and most economistswaiting for the Fed to begin its easing cycle in September.
The central bank has kept its benchmark overnight rate at the current range of 5.25%-5.5% since last July. It has raised its policy rate by 525 basis points from 2022.
Excluding the volatile food and energy components, the CPI gained 0.1% in June after rising 0.2% in May. In the 12 months through June, core CPI rose 3.3% after increasing 3.4% in May.
