The war against inflation is a long way away from being won

Don’t break out the party hats just yet: Despite recent signs that inflation is cooling, the fight to bring down the meteoric price increases of the past three years is far from over.

Financial markets drew optimism from two reports last week showing that the rate of growth in both the prices that consumers shell out at the checkout and those that businesses pay for the goods they use had hit multiyear lows.

But those data points reflected relative rates of change, and didn’t capture the overall surge that led to the highest inflation level in more than 40 years. What’s more, there are still troubling undercurrents in the economy, such as rising fuel prices and a clogged housing market that could cause problems ahead.

“No victory laps. No mission accomplished. Our work is not done,” Jared Bernstein, chair of the White House’s Council of Economic Advisers, said during a CNBC “Squawk Box” interview Monday morning. “But we’re very happy to see some breathing room for American households.”

The consumer price index, a widely followed gauge that tracks dozens of goods and services across multiple sectors, increased just 0.2% in June, taking the annual rate to 3.1%. That latter figure is down precipitously from its 9.1% peak a year ago, which was the highest in nearly 41 years, and is at its lowest since March 2021.

Also last week, the Labor Department reported the producer price index had risen just 0.1% in June and the same amount on an annual basis. The 12-month PPI reading had peaked at an annual rate of 11.6% in March 2022, its highest ever in data going back to November 2010.

Sharp declines in both readings raised hopes that, with inflation getting ever closer to the Federal Reserve’s 2% target, the central bank could ease up on interest rate hikes and the tight monetary policy that has been implemented since the early part of…