With reduced petrol prices and declining rental rates, US consumer prices dropped in June for the first time in four years. This effectively resumed the disinflationary trend and moved the Federal Reserve one step closer to lowering interest rates in September.
The Labour Department’s report on Thursday, which showed benign consumer price readings for the second consecutive month, should give officials at the US central bank more confidence that inflation is slowing down after rising sharply in the first half of the year.
The report also revealed that, every month, a measure of underlying inflation had increased at the lowest rate since August 2021. Financial markets believed there was a very good chance the Fed would begin its easing cycle in September.
Boston College economics professor Brian Bethune stated, “The Fed has a checkered flag to reduce rates in September, barring rogue price data in July.” “The July meeting is when this guidance will be finalized.
After remaining unchanged in May, the consumer price index decreased by 0.1% last month—its first decline since May 2020, according to the Labour Department’s Bureau of Labour Statistics. A 3.8 percent decline in petrol prices, after a 3.6 percent decline in May, hurt the CPI. Rents and other housing expenses grew by a moderate 0.2% following a 0.4% advance in May.
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