US inflation Long-awaited slowdown in June leads to slowest growth since 2021 Housing Costswhich is by far the strongest indication that federal Reserve can cut Rate of interest soon.
where did it go Core Consumer Price Index The U.S. dollar — which excludes food and energy costs — rose 0.1% from May, the smallest gain in three years, data from the Bureau of Labor Statistics showed Thursday. The overall measure fell for the first time since the start of the pandemic, dragged down by cheap gasoline.
Similar to May's CPI report — which Fed Chairman Jerome Powell this week described as “really good” after an unexpected rise in the first quarter — June's reading will go a long way in giving Powell and his colleagues the confidence they need to cut rates, likely starting in September. Policymakers will have a chance to signal such a move when they meet later in July, especially since unemployment has risen for three consecutive months.
Powell avoided signaling the timing of a potential rate cut in testimony before lawmakers this week, insisting policy moves would be driven by incoming data. The Fed chief is scheduled to speak again on Monday afternoon at a moderated discussion hosted by the Economic Club of Washington, DC.
“We are reasonably confident — even if the Fed is not yet willing to admit it — that inflation “It is moving back toward the 2% target,” Joseph Brusuelas, chief economist at RSM US LLP, said in a note. “The path is now open for a rate cut by the Federal Reserve in September.”
After the CPI report, Treasuries rose, and traders more likely expected rate cuts in September and December. They also saw a better chance of a cut in November — a move that would come just after the presidential election. Before Thursday, traders and policymakers were divided on whether there would be only one or two cuts this year.
The report also offers encouraging news for President Joe Biden, as he prepares for a high-stakes press conference on Thursday in which he is being called upon by fellow Democrats to step down as the party's nominee. The embattled president praised the data in a statement, saying it shows “significant progress” in the fight against inflation.
Metric Actual Estimates
CPI Monthly -0.1% +0.1%
Core CPI MoM +0.1% +0.2%
CPI YoY +3.0% +3.1%
Core CPI YoY +3.3% +3.4%
Shelter prices, which is the largest category within services, rose 0.2%, the smallest increase since August 2021. Owners’ equivalent rent — a subset of shelter that is the largest individual component of the CPI — rose 0.3%, the lowest in three years.
“Probably the most important aspect of the June report is the decline in housing inflation,” said Julia Coronado, founder of Macropolicy Perspectives LLC and a former Fed economist. “It looks broad-based and durable, and several Fed officials have indicated that the decline will increase their confidence that inflation is indeed returning to 2% in a sustainable way.”
Apart from the slower growth in fares, the cost of other services such as airfares, hotel stays and hospitalised patient care has also come down compared to a month ago. The prices of new and used vehicles have led to a broad decline across the basket of core commodities.
The BLS reported that the new vehicle index was estimated with lower prices than previous months due to a cyberattack on thousands of dealerships in June, but the software system has since been restored. “The BLS has no further information on when normal data flow will resume and is monitoring the situation closely,” the report said.
Separate data on Thursday showed recurring applications for unemployment benefits remained near the highest level since the end of 2021. At the same time, first-time applications fell by 17,000 last week — equal to the largest drop in a year — providing some optimism that the job market is picking up.
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Excluding housing and energy, prices for services fell for a second consecutive month, according to Bloomberg calculations. While central bankers have stressed the importance of looking at such metrics when assessing the country’s inflation trajectory, they calculate it based on a different index.
This measure, known as the Personal Consumption Expenditures Price Index, doesn't put as much emphasis on shelter as the CPI does. That helps explain why the PCE gauge is running close to the Fed's 2% target.
The PCE measure to be released later this month is derived from the CPI as well as some categories of the Producer Price Index, which is due out on Friday.
Delta Air Lines Inc.'s latest results show that services inflation is more likely to ease. The carrier's revenue forecast came in weaker than forecast as competition in the domestic market pushed down ticket prices.
Meanwhile, a steady decline in commodity prices over most of last year has provided some relief to consumers. Prices of so-called core commodities, which exclude food and energy items, fell for a fourth consecutive month in June.
New vehicle prices have fallen for the sixth consecutive month, and many apparel categories have also declined. Home furnishings prices have fallen nearly every month over the past year.
There are also signs that consumers are becoming more sensitive to rising prices. Earlier on Thursday, PepsiCo Inc. reported weaker-than-expected revenue growth as budget-minded shoppers weighed on the volume of goods sold. The salty snacks category has been particularly sluggish.
A separate report released on Thursday, combining inflation data with payroll data published last week, showed real income growth had been positive over the past year.
where did it go Core Consumer Price Index The U.S. dollar — which excludes food and energy costs — rose 0.1% from May, the smallest gain in three years, data from the Bureau of Labor Statistics showed Thursday. The overall measure fell for the first time since the start of the pandemic, dragged down by cheap gasoline.
Similar to May's CPI report — which Fed Chairman Jerome Powell this week described as “really good” after an unexpected rise in the first quarter — June's reading will go a long way in giving Powell and his colleagues the confidence they need to cut rates, likely starting in September. Policymakers will have a chance to signal such a move when they meet later in July, especially since unemployment has risen for three consecutive months.
Powell avoided signaling the timing of a potential rate cut in testimony before lawmakers this week, insisting policy moves would be driven by incoming data. The Fed chief is scheduled to speak again on Monday afternoon at a moderated discussion hosted by the Economic Club of Washington, DC.
“We are reasonably confident — even if the Fed is not yet willing to admit it — that inflation “It is moving back toward the 2% target,” Joseph Brusuelas, chief economist at RSM US LLP, said in a note. “The path is now open for a rate cut by the Federal Reserve in September.”
After the CPI report, Treasuries rose, and traders more likely expected rate cuts in September and December. They also saw a better chance of a cut in November — a move that would come just after the presidential election. Before Thursday, traders and policymakers were divided on whether there would be only one or two cuts this year.
The report also offers encouraging news for President Joe Biden, as he prepares for a high-stakes press conference on Thursday in which he is being called upon by fellow Democrats to step down as the party's nominee. The embattled president praised the data in a statement, saying it shows “significant progress” in the fight against inflation.
Metric Actual Estimates
CPI Monthly -0.1% +0.1%
Core CPI MoM +0.1% +0.2%
CPI YoY +3.0% +3.1%
Core CPI YoY +3.3% +3.4%
Shelter prices, which is the largest category within services, rose 0.2%, the smallest increase since August 2021. Owners’ equivalent rent — a subset of shelter that is the largest individual component of the CPI — rose 0.3%, the lowest in three years.
“Probably the most important aspect of the June report is the decline in housing inflation,” said Julia Coronado, founder of Macropolicy Perspectives LLC and a former Fed economist. “It looks broad-based and durable, and several Fed officials have indicated that the decline will increase their confidence that inflation is indeed returning to 2% in a sustainable way.”
Apart from the slower growth in fares, the cost of other services such as airfares, hotel stays and hospitalised patient care has also come down compared to a month ago. The prices of new and used vehicles have led to a broad decline across the basket of core commodities.
The BLS reported that the new vehicle index was estimated with lower prices than previous months due to a cyberattack on thousands of dealerships in June, but the software system has since been restored. “The BLS has no further information on when normal data flow will resume and is monitoring the situation closely,” the report said.
Separate data on Thursday showed recurring applications for unemployment benefits remained near the highest level since the end of 2021. At the same time, first-time applications fell by 17,000 last week — equal to the largest drop in a year — providing some optimism that the job market is picking up.
This is a modal window.
The media could not be loaded, either because the server or network failed or because the format is not supported.
Excluding housing and energy, prices for services fell for a second consecutive month, according to Bloomberg calculations. While central bankers have stressed the importance of looking at such metrics when assessing the country’s inflation trajectory, they calculate it based on a different index.
This measure, known as the Personal Consumption Expenditures Price Index, doesn't put as much emphasis on shelter as the CPI does. That helps explain why the PCE gauge is running close to the Fed's 2% target.
The PCE measure to be released later this month is derived from the CPI as well as some categories of the Producer Price Index, which is due out on Friday.
Delta Air Lines Inc.'s latest results show that services inflation is more likely to ease. The carrier's revenue forecast came in weaker than forecast as competition in the domestic market pushed down ticket prices.
Meanwhile, a steady decline in commodity prices over most of last year has provided some relief to consumers. Prices of so-called core commodities, which exclude food and energy items, fell for a fourth consecutive month in June.
New vehicle prices have fallen for the sixth consecutive month, and many apparel categories have also declined. Home furnishings prices have fallen nearly every month over the past year.
There are also signs that consumers are becoming more sensitive to rising prices. Earlier on Thursday, PepsiCo Inc. reported weaker-than-expected revenue growth as budget-minded shoppers weighed on the volume of goods sold. The salty snacks category has been particularly sluggish.
A separate report released on Thursday, combining inflation data with payroll data published last week, showed real income growth had been positive over the past year.