In June 2024, the monthly inflation rate in the United States decreased for the first time in over four years. This development is expected to give the Federal Reserve more leeway to consider reducing interest rates later in the year.
The Labor Department revealed that the consumer price index, which measures the costs of goods and services across the U.S. economy, fell by 0.1% from May, resulting in a 3% 12-month rate, the lowest level in more than three years. Notably, this decrease marks the first instance of a drop in the monthly rate since May 2020.
Excluding the volatile food and energy costs, the core CPI rose by 0.1% monthly and 3.3% year-on-year, slightly below the projected increases of 0.2% and 3.4%, as reported by the Bureau of Labor Statistics. The annual upsurge in the core rate is the smallest recorded since April 2021.
The decline in gasoline prices by 3.8% in June contributed to curbing inflation for the month, balancing out the 0.2% upticks in both food prices and shelter costs. Housing-related expenses, a significant component of inflation, experienced a slight slowdown in their rate of increase, which is a positive indication.
Furthermore, used vehicle prices dropped by 1.5% monthly and 10.1% annually, significantly impacting the inflation surge seen in 2021.
Despite the Federal Reserve’s target annual inflation rate of 2%, the June CPI report suggests that the pricing trend is moving favorably. Post-report, traders in the fed funds futures market expanded their expectations of potential interest rate cuts by the central bank starting in September.
