Federal Reserve Board Vice Chair for Supervision Michael Barr
Photo Credit: Gerald R.
U.S. consumer prices fell for the first time in four years in June due to cheaper gasoline and lower rents, reviving disinflation and bringing the Federal Reserve closer to cutting rates in September.
The Labor Department’s second straight month of benign consumer price data on Thursday should reassure U.S. central bank officials that inflation is dropping after rising in the first quarter.
The study indicated the weakest monthly increase in underlying inflation since August 2021. Financial markets mostly expected the Fed to ease in September.
“Barring rogue price data in July, the Fed has a checkered flag to reduce rates in September,” said Boston College economics professor Brian Bethune. “This guidance will be solidified at the July meeting.”
The Bureau of Labor Statistics said that the consumer price index fell 0.1% last month, the first drop since May 2020, after being stable in May. A 3.8% drop in gasoline prices followed a 3.6% drop in May, lowering the CPI. Rents and other shelter costs rose 0.2% after 0.4% in May.
Food prices jumped 0.2% after 0.1% in May. Dairy, meat, fish, and eggs rose by 0.1%, whereas fruits, vegetables, and cereals fell.
The 12-month CPI rose 3.0%, the lowest growth since June 2023. That followed a 3.3% May gain.
The broad moderation in inflation matches merchant accounts of people resisting rising pricing. Target and Walmart have reduced prices on a variety of items. It was a rare boost for President Joe Biden, whose popularity has been suffering due to the high cost of living.
Consumer price growth has slowed from 9.1% in June 2022. The CPI figure follows last week’s jobless rate increase to 4.1% from 4.0% in May, a 2-1/2-year high.
The central bank’s large rate hikes in 2022 and 2023 have slowed economic development, with second-quarter GDP estimated near the 1.8% annualized rate policymakers consider non-inflationary.
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