What good news! Inflation cools to 3% as it reaches the Fed’s 2% target
What good news! Inflation cools to 3% as it moves away from the Fed’s 2% target – while used car prices and airline fares plummet
Inflation in the US has slowed to 3 percent year on year – the lowest rate in more than two years.
The latest consumer price index released by the Bureau of Labor Statistics on Wednesday showed inflation rose 0.2 percent in June, after rising 0.1 percent in May.
The annual inflation rate of 3 percent is a sharp drop from last June’s peak of 9.1 percent and down from May’s 4 percent increase.
It’s the most hopeful news since the Federal Reserve began trying to curb rapid price increases 16 months ago — with the target rate of 2 percent inflation within reach.
However, Fed officials have indicated they will likely still raise rates by a quarter point to the highest level in 22 years at their July meeting later this month. In June, the Fed pushed for a pause of 10 consecutive rate hikes – holding the benchmark interest rate steady between 5 and 5.25 percent as inflation began to ease.
It’s the 12th month in a row that annual inflation, as measured by the CPI, has slowed — and it’s slightly below economists’ forecasts for a 3.1 percent increase.
So-called core consumer prices, which exclude volatile items such as food and energy and are considered a better gauge of long-term trends, have also cooled.
For the 12 months ended June, core CPI rose 4.8 percent — down from the 5.3 percent reported in May and lower than the 5 percent increase economists had predicted.
On a monthly basis, it rose 0.2 percent in June – down from 0.4 percent in May. This is the smallest one-month increase in that index since August 2021, suggesting that underlying price pressures are gradually easing.
June’s rise in inflation was driven primarily by housing costs, including rent, which accounted for more than 70 percent of the rise.
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