Inflation fell to its lowest annual rate in more than two years during June, the product both of some deceleration in costs and easy comparisons against a time when price increases were running at a more than 40-year high.
The consumer price index, which measures inflation, increased 3% from a year ago, which is the lowest level since March 2021. On a monthly basis, the index, which measures a broad swath of prices for goods and services, rose 0.2%.
That compared with Dow Jones estimates for respective increases of 3.1% and 0.3%.
Stripping out volatile food and energy prices, core CPI rose 4.8% from a year ago and 0.2% on a monthly basis. Consensus estimates expected respective increases of 5% and 0.3%. The annual rate was the lowest since October 2021.
In sum, the numbers could give the Federal Reserve some breathing room as it looks to bring down inflation that was running around a 9% annual rate at this time in 2022, the highest since November 1981.
“There has been significant progress made on the inflation front, and today’s report confirmed that while most of the country is dealing with hotter temperatures outside, inflation is finally cooling,” said George Mateyo, chief investment officer at Key Private Bank. “The Fed will embrace this report as validation that their policies are having the desired effect – inflation has fallen while growth has not yet stalled.”
However, central bank policymakers tend to look more at core inflation, which is still running well above the Fed’s 2% annual target. Mateyo said the report is unlikely to stop the central bank from raising rates again later this month.
Fed officials expect the inflation rate to continue falling, particularly as costs ease for shelter, which makes up about one-third of the weighting in the CPI. However, the shelter index rose 0.4% last month and was up 7.8% on an annual basis. That monthly gain accounted for about 70% of the increase in headline CPI, the Bureau of Labor Statistics said.
“Housing costs,…
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