Consumer prices in June rose at the lowest annual rate since March 2021
Consumer prices rose at their slowest pace since March 2021 as inflation showed further signs of cooling in June, according to the latest data from the Bureau of Labor Statistics released Wednesday morning.
The consumer price index (CPI) rose 0.2% from the previous month and 3% from a year earlier in June, a slight acceleration from May’s 0.1% monthly increase, but a decline compared with the month’s 4% annual gain.
Both measures were slightly better than economist forecasts for a 0.3% month-on-month increase and a 3.1% annual increase, according to data from Bloomberg.
On a “core”[ads1]; basis, which strips out the more volatile costs of food and gas, prices in June rose 0.2% from the previous month and 4.8% from a year ago. Both targets were also slightly better than the economists’ expectations.
The monthly core increase was the smallest 1-month increase in that index since August 2021.
Core inflation remained particularly sticky last month as rents continue to rise. The index for house rent and owner equivalents rose by 0.5% and 0.4%, respectively, seasonally adjusted. Owners’ equivalent rent is the hypothetical rent a homeowner would pay.
The refuge index, which jumped 7.8% annually and 0.4% between May and June on a seasonally adjusted basis, was the biggest factor in the monthly rise in core inflation.
Among the other indices that rose in June were the index for motor insurance, which rose 1.7%, and the index for clothing, which rose 0.3%. Indices for recreation and personal care also rose last month, the BLS noted.
Still, other indices saw prices soften, such as airfares, which fell 8.1%, along with used car prices, which was expected.
The energy index fell 16.7% for the 12 months ending in June, although prices rose 0.6% on a seasonally adjusted month-over-month basis after falling 3.6% in May’s report.
The food index increased by 5.7% in the past year, and food prices rose by 0.1% from May to June. Egg prices fell a further 7.9% last month after falling 13.8% in May and 1.5% in April.
US stocks rose in early trading after the release of the data. Treasury yields fell about 8 basis points to around 3.9%.
Although 3% jump in headline inflation represents a continued slowdown, it remains well above the Federal Reserve’s 2% target.
That, along with last week’s jobs report data that showed a robust labor market with low unemployment and high wages, suggests the Federal Reserve will continue to raise interest rates this year.
Cleveland Fed President Loretta Mester and San Francisco Fed President Mary Daly both signaled on Monday that more rate hikes were needed to curb inflation.
Investors will be closely watching comments from central bank officials, including Minneapolis Fed President Neel Kashkari, Atlanta Fed President Raphael Bostic, Richmond Fed President Tom Barkin and Cleveland Fed President Loretta Mester, all of whom are expected to speak on US economic policy throughout on Wednesday.
The central bank halted its aggressive rate hike cycle in June, but indicated that it is likely to raise rates by 0.25% twice more this year (or raise rates by 0.50% in one shot).
Immediately after the data was released, markets were pricing in a roughly 90% chance that the Federal Reserve will raise interest rates by another 0.25% at its July 26 policy meeting, according to CME Group data.
Alexandra is a senior reporter at Yahoo Finance. Follow her on Twitter @alliecanal8193 and email her at alexandra.canal@yahoofinance.com
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