USA (Washington Insider Magazine)- Consumer prices in the USA rose by 3% in June, below the May rate and below expectations. This marked slowdown is a further indication that the strong inflation is easing, which could prompt the Federal Reserve to lower interest rates on mortgages, credit card payments, etc.
Yearly and Monthly Inflation Data
The Bureau of Labor Statistics’ report strengthens hopes that the Federal Reserve will cut interest rates in September. Such a move could provide economic relief ahead of the November election. Fed Chair Jerome Powell, in remarks to Congress, stressed the need for “more good data” on inflation before adjusting rates.
Core Inflation Trends
“Core” inflation, excluding food and energy prices, rose only 0.1% from May to June, the slowest monthly growth since January 2021. Gasoline prices fell 3.8%, used vehicle prices dropped 1.5%, and shelter costs increased by just 0.2%.
Future Federal Reserve Actions
According to NBCnews, Although the Fed is unlikely to announce interest rate changes at its meeting this month, it may signal a potential pivot during its annual Jackson Hole meeting in August. The central bank faces ongoing pressure to cut rates due to a slowing labor market, with unemployment at 4.1%, the highest since February 2018, excluding 2020’s surge in job losses.
Economic Analysis
Guy Berger, Director of Economic Research at the Burning Glass Institute, noted that the labor market is cooling but not yet tipping into recession. The Fed’s federal funds rate remains at about 5.5%, the highest since before the 2008 financial crisis, aimed at reducing demand for borrowing and slowing price increases.
Effectiveness of Current Rates
The elevated rates have largely worked. Inflation has fallen sharply since peaking at 9.1% in June 2022, but it has been stuck around 3% all year. Powell told Congress this week there continued to be “modest” progress toward its 2% goal, and he said inflation expectations remain “anchored” — meaning a low risk of price growth picking up again.
Consumer Spending and Price Increases
Economists attribute the slowdown in inflation partly to more cost-conscious consumer behavior and reduced growth in input costs, including labor. Wells Fargo economist Sarah House suggested that these factors limit the extent of price increases across the service sector.
Calls for Rate Cuts
Some economists and many left-leaning lawmakers say the Fed has already waited too long to cut rates. Pantheon Macroeconomics Chief Economist Ian Shepherdson cautioned in a recent note that the central bank “soon will be rushing to stop a significant downturn.”
