Inflation rose just 0.2% in June, less than expected as consumers get a break from price increases

During June, inflation fell to its lowest annual rate in more than two years, resulting in both cost declines and comparisons to a time when price increases were more than 40 years high. Since March 2021, the consumer price index has increased by 3%, the lowest level since March 2021. On a monthly basis, the index, which measures a broad swath of prices for goods and services, rose 0.2%. That compares with Dow Jones estimates for respective increases of 3.1% and 0.3%. By excluding volatile food and energy prices, the core CPI rose 4.8% from a year ago and 0.2% every month. Consensus estimates expected respective increases of 5% and 0.3%. The annual rate was the lowest since October 2021.

Overall, the numbers could provide the Federal Reserve with some breathing room as it tries to bring down inflation, which reached 9% in 2022, the highest rate since 1981. “There has been significant progress made on the inflation front, and today’s report confirmed that while most of the country is dealing with hotter temperatures outside, inflation is finally cooling,” said George Mateyo, chief investment officer at Key Private Bank. “The Fed will embrace this report as validation that their policies are having the desired effect – inflation has fallen while growth has not yet stalled.” However, central bank policymakers tend to look more at core inflation, which is still well above the Fed’s 2% annual target. Mateyo said the report will unlikely stop the central bank from raising rates again later this month. Fed officials expect the inflation rate to continue falling, particularly as costs ease for shelter, which makes up about one-third of the weighting in the CPI. However, the shelter index rose 0.4% last month and was up 7.8% annually. That monthly gain accounted for about 70% of the increase in headline CPI, the Bureau of Labor Statistics said.