The Labor Department said Thursday that the Consumer Price Index (CPI) fell to a 3.3% year-over-year increase in June, marking the first monthly decline in prices since the pandemic began.
The Labor Department said on Thursday that the consumer price index (CPI) rose 3.3% year-on-year in June, down from 3.3% in May, as inflation continued to fall.
The consumer price index also fell 0.1% in June, the second straight month of flat or falling prices, and economists’ consensus forecast for annual inflation is 3.1%.
June’s drop marked the third consecutive month of declining annual CPI growth, a trend also reflected in the personal consumption expenditures (PCE) price index, another key measure of inflation.
Economists greeted the news that prices were falling with enthusiasm.
“June inflation data is staggering!” former White House chief economist Jason Furman posted on social media on Thursday morning.
“Core” CPI prices, which exclude particularly volatile items such as energy and food, rose 0.1% in June, following a 0.2% increase in May and a 0.3% increase in April.
Furman noted that on average over the past three months, core CPI rose just 1.1%.
Food prices rose 2.2% year-on-year in June, while energy prices rose 1.1%.
Housing costs, which make up the bulk of the inflation remaining in the economy, increased just 0.2% from the previous month but are still high at 5.2% higher than a year ago, down from a 0.4% increase in the previous month.
Falling inflation has increased the likelihood that the Federal Reserve will cut interest rates this year, possibly as early as later this month.
Markets are eagerly awaiting a rate cut from the Fed, which is widely seen as having a stimulative effect on the economy.
“The report places us firmly within the inflation path of sustainably declining to 2%. This is another good overall report that the Fed will embrace wholeheartedly,” Fitch Ratings economist Ol Sonora said in reaction to the CPI release.
“While the Fed is close to feeling confident enough to start cutting rates, it will likely want to see similar numbers in August and September before making its first cut,” he wrote.
Recent weak employment data also strengthens the case for lower interest rates, according to many commentators.
The unemployment rate rose to 4.1% in June, from 4.0% in May and 3.9% in April.
Updated 9:22 a.m. ET
