US June inflation slows to 1-year low of 3pc

Market: Metals, Natural gas, Oil products
11/07/24

US inflation slowed in June to the lowest in a year while core inflation hit a more than three-year low, signs of easing price pressures that may prompt Federal Reserve policymakers to begin cutting borrowing costs in the fall.

The consumer price index (CPI) slowed to an annual 3pc in June, lower than economists' estimates for a 3.1pc reading, from 3.3pc in May and 3.4pc in April, the Bureau of Labor Statistics reported today. So-called core inflation, which strips out volatile food and energy prices, rose by 3.3pc in June, the lowest since April 2021, and slowing from 3.4pc in May.

The energy index rose by an annual 1pc in June, down from 3.7pc in May, while the gasoline index contracted by 2.5pc in June compared with a 2.2pc gain in May. Energy services rose by an annual 4.3pc, slowing from 4.7pc the prior month.

After the report, the CME's FedWatch tool signaled an 81pc probability that the Fed will cut its target rate by a quarter point in September from near 70pc odds Wednesday. Probabilities of three quarter point cuts by December rose to 38pc today from 26pc the prior day.

Food costs rose by 2.2pc in June from 2.1pc the prior month. Shelter rose by 5.2pc from 5.4pc the prior month. Transportation services rose by 9.4pc in June following a 10.5pc gain the prior month. Airline fares fell by 5.1pc in June after a 5.9pc decline.

Headline inflation had risen from 3.1pc in January to as high as 3.5pc in March as economic data, especially job gains, had come in stronger than expected. That had prompted the Federal Reserve to delay widely expected rate cuts as it said it needed "greater confidence" that inflation was on a "sustained" path towards its 2pc target.

The Fed hiked its target rate to a 23-year high of 5.25-5.5pc in July 2023 and has kept it there since to rein in inflation that hit a high of 9.1pc in June 2022. The Fed, in its latest policy meeting last month, penciled in one likely quarter point cut this year, down from three penciled in last March.

CPI contracted by a seasonally adjusted 0.1pc in June from the prior month, after a flat reading in May, a 0.3pc monthly gain in April and 0.4pc gains in February and Marhc. Core CPI was up by 0.1pc for the month after a monthly gain of 0.2pc in May.

By Bob Willis

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