Here are the key takeaways from the US consumer price report for June released on Wednesday.
US inflation sharply cooled last month, which is good news for consumers, the markets, and the Fed. The CPI rose 3% in June from a year ago, the slowest rate in more than two years, according to data from the Bureau of Labor Statistics. The surprisingly good report probably isn’t enough to stop the Federal Reserve from going ahead with a well-signaled interest rate hike this month but raises doubts about whether more hikes will be needed.
Excluding food and energy, the CPI rose 0.2% from the prior month. From a year ago, the so-called core measure — which economists view as the better indicator of underlying inflation — advanced 4.8%, the slowest since late 2021 but still well above the Fed’s target.
Shelter was the largest contributor to the monthly increase, climbing 0.4%, including the smallest increase in a key measure of rent since the end of 2021. Most economists are looking for further moderation here, though. Airfares fell 8.1%, the second-largest drop since April 2020. Used cars and trucks fell as well. There was a mixed performance across big cities.
Fed Chair Jerome Powell has been focused on core services excluding housing, which was little changed in June from the prior month. From a year ago, it decelerated to a 4% advance, also the smallest increase since late 2021. Fed leaders have seen a tight labor market as contributing to higher services prices, though that didn’t happen last month.
Stocks opened higher, with the S&P 500 up by 0.86% and the Nasdaq 100 by 1.11% as investors cheer the cooler-than-forecast inflation print.