US inflation rose 3% in June, smallest increase since March 2021
US data from June showed that inflation cooled last month, though it’s likely not enough to stop the Federal Reserve from further hiking interest rates.
The Consumer Price Index — a closely-monitored measure of inflation that tracks changes in the costs of everyday goods and services — rose 3% in June versus a year earlier, according to data released by the US Bureau of Labor Statistics on Tuesday.
That was short of the 3.1% increase economists expected and is the smallest advance since March 2021. The number was also lower than May’s 4% increase.
Last June, inflation had peaked at 9.1%.
The core CPI — which excludes volatile food and energy prices — rose 0.2% from a month ago, marking the smallest one-month increase in that index since August 2021, the Bureau of Labor Statistics reported.
Core CPI excluding food and energy costs was up 4.8% over the last 12 months, lower than the 5.0% increase economists expected.
Shelter was the largest contributor to last month’s increase — accounting for more than 70% of the rise — followed by motor vehicle insurance, apparel, recreation and personal care.
The food index increased 5.7% over the last year, with food prices rising 0.1% from May to June.
Egg prices, however, fell 7.9% last month after dropping 13.8% in May.
The airline fares index saw the steepest decline in June, falling 8.1% month-over-month.
Following the release of the CPI report, stocks rose.
The Dow Jones Industrial Average gained 0.3%, while the S&P 500 climbed 0.7% and the tech-focused Nasdaq popped 1.2%.
The latest figures come after the Fed agreed to hold interest rates steady at 5% to 5.25% at the June meeting as a way to buy time and assess whether further rate hikes would be needed.
“Almost all” Fed officials reportedly agreed on the pause — which comes after a 10-meeting streak of rate hikes.
However, “some participants” wanted to move ahead with a rate hike in an effort to reach the bank’s 2% inflation goal.
Fed Chair Jerome Powell has also said that “the process of getting inflation back down to 2% has a long way to go.”
The contrast between the Fed’s stated concern over still-high inflation and its decision to skip a rate hike has heightened uncertainty about its next moves.
Thus, the central bank is expected to continue to hike rates in July, and there’s about a one-in-three chance of another increase before the end of the year.
Last week’s job report was another indicator that more rate hikes are imminent as figures showed a resilient labor market with low unemployment and high wages.
The US economy added 209,000 job in June, a slight decrease from the robust 339,000 jobs that were gained in May.
Unemployment was little changed month-over-month, from 3.6% from 3.7% — still slightly above the five-decade low of 3.4%.
Fed officials have said they think strong hiring can often fuel inflation if companies feel compelled to raise pay to attract and keep workers.
Thus, a slowdown in job growth and pay raises could help the Fed reach its 2% inflation target.
