Inflation fell to its lowest annual rate in more than two years in June, the product of some spending cuts and a quick comparison against a period of rising prices that has been running for more than 40 years. high.
The consumer price index rose 3% from a year ago, which is the lowest level since March 2021. On a monthly basis, the index, which measures a wide range of prices for goods and services, increased by 0.2%.
That compares to Dow Jones estimates for respective increases of 3.1% and 0.3%.
Excluding volatile food and energy prices, the core CPI rose 4.8% from a year ago and 0.2% monthly. Consensus estimates expect respective increases of 5% and 0.3%.
Overall, the numbers give the Federal Reserve a little breathing room as it looks to lower inflation, which is running around the 9% annual rate by this time in 2022, the highest since November 1981.
However, central bank policymakers are increasingly watching core inflation, which is still running above the Fed’s 2% annual target.
Fed officials expect the inflation rate to continue to fall, especially if the costs are easy for housing, which makes up a third of the weight of the CPI. However, the shelter index rose 0.4% last month and rose 7.8% year-on-year.
Wall Street reacted positively to the report, with futures tied to the Dow Jones Industrial Average up more than 200 points. Treasury yields fell across the board.
Traders are still pricing in a strong possibility that the Fed will implement a quarter percent rate hike when it meets later this month. However, the market is pricing in that final hike as officials hold back to allow a series of hikes to work their way through the economy.
The muted increase for the headline CPI came even as energy prices rose 0.6% for the month. However, the energy index is down 16.7% from a year ago, a time when gasoline prices at the pump were running around $5 per gallon.
Food prices rose just 0.1% on the month while used car prices, a key source of inflation surges in early 2022, fell 0.5%.
This is breaking news. Please check back here for updates.