United States: Inflation falls to lowest level since March 2021 in June
Inflation came in at 3.0% in June, which was down from May’s 4.0%. June’s reading marked the lowest inflation rate since March 2021 but was still above the Fed’s 2% target. Looking at the details of the release, prices for food and housing rose at a slower pace in June, while prices for transportation decreased at a sharper rate.
Annual average inflation fell to 6.3% in June (May: 6.8%). Meanwhile, core inflation fell to 4.8% in June, down from the previous month’s 5.3% and below market expectations. Lastly, consumer prices increased 0.18% from the previous month in June, picking up from May’s 0.12% increase.
Despite the encouraging data, the Fed is still likely to hike rates again at its late-July meeting to ensure that inflation remains on a downward path. As TD Economics’ Thomas Feltmate said:
“Inflation is moving in the right direction, but progress should not be confused with mission accomplished. Core inflation is still running at a multiple of the Fed’s 2% inflation target, while […] employment data showed that the labor market continues to exude a surprising degree of resilience. Another 25 basis-point rate hike at FOMC’s upcoming July 25-26th meeting seems inevitable.”