Inflation Decline Seen as a ‘Confidence Booster’

Inflation eased in June as a continued slowdown in price increases signaled that the Federal Reserve may cut interest rates by the end of the summer.

By Eric Colby

July 12, 2024

The Consumer Price Index declined 0.1% in June after being unchanged in May, the U.S. Department of Labor Statistics reported yesterday, reducing the year-over-year inflation rate to 3%, the lowest since June 2023.

The inflation decline extended a recent slowdown in price increases that could open a path for the Federal Reserve to cut interest rates by the end of the summer, according to reporting by The Wall Street Journal.

The index for gasoline fell 3.8% in June, compared with a 3.6% decline in May. The energy index fell 2%, and the index for food increased 0.2%.

Excluding food and energy, core prices rose 0.1%, the mildest increase since January 2021.

The report showed that “prices cooled broadly in the second quarter and were below economists’ expectations,” WSJ reported, the opposite of what happened in the first three months of the year.

“We’ve definitely seen a pretty sharp slowing,” Kevin Cummins, chief U.S. economist at NatWest Markets, told the newspaper. “This is certainly a confidence booster for the Fed.”

WSJ said investors don’t expect the Fed to lower interest rates at its July 30-31 meeting, but officials could lay the groundwork for a cut in September.