Consumers are experiencing their first relief from inflation since the peak of the 2020 pandemic.
In an unexpected development, the Labor Department said on Thursday that prices for consumer goods and services fell in June.
The big drop signals a recent slowdown in inflation and is raising hopes that the Federal Reserve may sharply cut high U.S. interest rates in the coming months.
The Consumer Price Index (CPI) fell 0.1% in June after remaining flat in May, marking the first decline since May 2020, when the pandemic forced the economy into unprecedented shutdowns.
The 12-month inflation rate also fell to 3.0% from 3.3%, reaching its lowest level since April 2021.
Economists had expected the CPI to rise 0.1% this month and 3.1% over the 12-month period.
After a drop in June, prices are up 18.8% since Biden took office. During the same 3 1/2-year term of President Donald Trump, prices rose just 5.3%. Before the pandemic period, prices rose 6.2% under President Donald Trump.
Core CPI, which excludes volatile food and energy prices, rose a modest 0.1% for the second straight month, the slowest two-month increase in more than three years and reflecting a slowing trend in underlying inflationary pressures.
Year-on-year, core inflation edged down to 3.3% from 3.4%, further highlighting the continuing slowdown in price growth.
Economists had expected core inflation to rise 0.2% in the past month and to rise 3.5% for the year.
The headline figures fell mainly due to a sharp 2% drop in energy prices from the previous month, with gasoline prices down 3.8%.
It wasn’t all good news. Food inflation accelerated in June, rising 0.2% after a 0.1% increase in May. The Food Price Index rose 0.1% and the Eating Out index rose 0.4%.
The housing index rose 0.2% in June, including a 0.3% increase in rents and owner-occupied equivalent rents. This was the smallest increase in these indexes since August 2021.
