US consumer inflation eases more than expected in June
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The latest CPI report adds to a series of encouraging data that could give officials confidence that inflation is coming down to their two per cent target.
PHOTO: REUTERS
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WASHINGTON - US inflation cooled more than expected in June, government data showed on July 11, a positive development for President Joe Biden as he fights to win confidence on his economic record in his re-election bid.
The consumer price index (CPI) rose 3 per cent in June from a year ago, said the Labour Department, as a fall in petrol prices more than offset housing costs.
A consensus forecast of analysts had pegged the inflation figure at 3.1 per cent, down from 3.3 per cent in May.
Meanwhile, a measure that strips out volatile food and energy prices saw the smallest annual rise since 2021.
The world’s biggest economy has been on a bumpy path to reining in inflation, which soared to a blistering 9.1 per cent in mid-2022.
This prompted the central bank to rapidly hike interest rates in hopes of easing demand and bringing down price increases.
Federal Reserve chairman Jerome Powell told lawmakers this week that there has since been “modest” progress.
In June, overall CPI declined 0.1 per cent month on month for the first time since 2020, the latest Labour Department report showed.
The “core” CPI index excluding the volatile food and energy segments came in at 3.3 per cent year on year, the smallest jump since April 2021.
The latest CPI report adds to a series of encouraging data that could give officials confidence that inflation is coming down to their target of 2 per cent.
This, in turn, would allow them to start cutting decades-high interest rates.
The jobs market, another segment that Fed policymakers are monitoring, has also returned to a “strong, but not overheated” state, Mr Powell said this week.
Rate-cut possibility
A further deceleration in prices, alongside a cooldown in labour market conditions, would “support a change in message from the Fed” at its policy meeting in July, said the chief US economist at High Frequency Economics, Ms Rubeela Farooqi.
This could open the door to rate cuts as soon as the September meeting, she said.
But Mr Dan North, senior economist at Allianz Trade North America, said: “We still have a ways to go yet.”
He noted that shelter has been a major factor behind the stickiness of inflation, warning: “I don’t see relief in the housing market for some period of time after the Fed starts to cut rates.”
He told AFP: “Even if the Fed starts cutting in September, it’s going to be months and months before we see enough significant movement in the 30-year mortgage to make a difference.” AFP
