US prices unexpectedly drop in June, boosting Fed cut case
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The news: US consumer prices unexpectedly declined in June, reinforcing the Federal Reserve’s case for a potential interest rate cut.
The numbers: The consumer price index (CPI) dipped 0.1% - the first decline since the pandemic’s onset - after remaining unchanged in May, according to the Bureau of Labor Statistics. Over the year to June, the CPI rose 3.0%, down from May's 3.3% increase and below economists polled by Reuters' forecasts of 3.1%.
The core consumer price index, excluding food and energy, rose by 0.1% from May, the smallest increase since August 2021. It increased 3.3% over the year, the slowest pace in more than three years. Decreases in rental inflation, airfares, hotel and vehicle prices contributed to the decline.
The context: The drop in prices supports the Fed's growing confidence that inflation is sustainably moving towards its targeted 2%, potentially bringing them closer to cutting interest rates. It comes after a jobs data last week showed a third consecutive month of rising unemployment to 4.1%, the highest in 2.5 years.
What they said: "We've definitely seen a pretty sharp slowing," Kevin Cummins, chief US economist at NatWest Markets, told The Wall Street Journal. "This is certainly a confidence booster for the Fed.”
The sources: Bureau of Labor Statistics, The Wall Street Journal, Reuters, Bloomberg
