US consumer prices posted their smallest annual rise in more than two years in June, a sign that inflation is still falling, but probably not enough to deter the Federal Reserve from raising interest rates again. The end of this month.
The inflation figure reported by the government on Wednesday reflected a 3% year-on-year rate in June, a sizeable decline from the 4% recorded in May, but still above the Fed’s threshold of 2%.
In the past 12 months, gas prices have fallen, food costs have slowed, and used cars are already less expensive.
According to the Labor Department report, the Consumer Price Index (CPI) rose 0.2% last month, after 0.1% in May, driven by some gasoline and rental prices.
Economists polled by Reuters had expected the CPI to rise 0.3% last month and 3.1% year-on-year.
Annual consumer prices have receded sharply from the peak of 9.1% reached in June 2022, which was the largest increase since November 1981. Nevertheless, inflation remains above 2% and the labor market remains tight.
The US central bank did not raise rates in June. The Fed has raised its key interest rate by 500 basis points since March 2022, when it embarked on its fastest monetary-policy tightening campaign in more than 40 years.
The improvement in the inflationary environment was underscored by a moderation in the rate of increase in core prices.
A sustained slowdown in inflation would be a welcome relief for US households. Inflation spiked as consumers took advantage of three rounds of pandemic stimulus to buy items like exercise bikes, desks and patio furniture.
The jump in demand far exceeded the capacity of the supply chain, fueling inflation.
Many economists suggested that President Joe Biden’s March 2021 stimulus package intensified inflationary pressures, but at the same time, inflation spiked abroad as well, even in countries where stimulus was much less.
Russia’s invasion of Ukraine also pushed up energy and food prices around the world.
[Con información de The Associated Press y Reuters]
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