US inflation falls below expectations in June

The recent data from the Labor Department’s Bureau of Labor Statistics indicates a decline in US consumer prices in June, with the Consumer Price Index (CPI) dipping 0.1% following a stagnant reading in May.
This marks the second consecutive month of stable CPI readings, suggesting a possible cooling of inflation. The annual CPI increase of 3.0% in June is the smallest in a year and lower than the 3.3% increase in May, indicating a slowdown from the peak of 9.1% observed in June 2022.
Economists had anticipated a slight rise of 0.1% for June and a year-on-year gain of 3.1%, so the actual figures came as a surprise.
Despite this, the CPI still exceeds the Federal Reserve’s target inflation rate of 2%, measured by the Personal Consumption Expenditures (PCE) price index, which increased 2.6% in May.
The report on CPI follows recent data indicating a rise in the unemployment rate to 4.1% in June from 4.0% in May, and slower economic growth, with the second-quarter GDP expected to align with the non-inflationary growth rate of 1.8% annualized.
Federal Reserve Chair Jerome Powell has acknowledged the positive trend in price pressures but remains cautious, emphasizing the need for more consistent data before considering rate cuts.
The central bank has held its benchmark interest rate at 5.25%-5.50% since last July, following a series of hikes amounting to 525 basis points since 2022.
Core CPI, which excludes food and energy, rose by 0.1% in June after a 0.2% increase in May, with a year-on-year increase of 3.3% compared to 3.4% in May.
These figures, along with the cooling labor market and slowing economy, have led many to expect the Federal Reserve to begin easing rates by September.