In a boost to consumers, US inflation is cooling faster than expected

Consumer prices continue to fall, with June figures showing US inflation cooling again after unexpectedly high values earlier this year. The new report could strengthen the case for a rate cut by the Federal Reserve in September.

Consumer prices fell 0.1% in June from May, with inflation held steady by lower gas prices and a smaller increase in grocery store costs. On an annual basis, inflation registered 3.0%, down from 3.3% in May, indicating inflation is cooling faster than expected, as economists polled by FactSet had forecast a 3.1% increase.

This is the lowest level since June 2023, when prices also rose by 3% year-on-year.

Fed Chairman Jerome Powell on Wednesday reported “significant progress” in slowing inflation to the central bank's 2% target. Still, he stressed that the central bank needs “more good data” to have the confidence to cut its benchmark interest rate, which currently stands at a 20-year high of 5.3%, which has made it more expensive for consumers and businesses to borrow money through mortgages and other loans.

“A further slowdown in prices combined with an easing in labor market conditions supports a changed message from the Fed at the July FOMC meeting, opening the door for rate cuts as early as the September meeting,” Rubeela Rarooqi, chief U.S. economist at High Frequency Economics, said in a research note on Thursday.

The latest inflation report shows inflation “sustainably declining toward 2%,” said Olu Sonola, head of U.S. economic research at Fitch Ratings. “Sufficient confidence to start cutting rates is approaching, but the Fed likely wants to see similar results in August and September before pulling the trigger on that first rate cut.”

Gasoline prices fell 3.8% in June, after a 3.6% drop in May, more than offsetting higher house prices, the data showed. issued Thursday by the Bureau of Labor Statistics. Food rose slightly by 0.2% in June.

The core CPI (excluding fluctuating food and energy costs) rose 0.1%.

Stock futures rose after the report, while government bond yields fell.

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