The annual inflation rate cooled to 3% in June and for the first time since the pandemic began the Consumer Price Index showed an overall 0.1% decline in the cost of goods and services for the one-month period ending in June, the federal government said Thursday.
Lower gas prices helped to usher in the first month-on-month decline since May 2020, The U.S. Bureau of Labor Statistics said. The index for gasoline fell 3.8% in June, after declining 3.6% in May, more than offsetting a 0.2% increase in shelter for the month of June.
The all-items index declined 0.1% on a seasonally adjusted basis, after being unchanged in May. The core index, which strips out more volatile food and energy prices and is often viewed as a better gauge of underlying inflation, rose just 0.1% in the one-month period ending in June. This is the softest monthly increase in the core index since August 2021.
Some core index items that increased on month-to-month basis included shelter (+0.2%); medical care (+0.2%); motor vehicle insurance (+0.9%); and household furnishings (+0.5%). Airline fares fell (-5.0%) in June; the used cars and trucks index was down (-1.5%) and new vehicle index was down (-0.2%) in June.
On an annual basis, overall consumer prices increased 3% for the 12-month period in June, a slower pace than the 3.3% increase for the 12-month period that ended in May.
Over the past 12 months the shelter index has increased 5.2%, accounting for nearly 70% of the total 12-month increase in the all-items index. Other indexes with notable increases over the last year include motor vehicle insurance (+19.5%); medical care (+3.3 %); personal care (+3.2%), and recreation (+1.3%).
Although the 3% inflation rate remains above the Federal Reserve’s target of 2%, the positive CPI report for June points toward the possibility that the Fed may move forward with longed-delayed cuts to interest rates. So far, the Fed has kept interest rates at a two-decade high as part of its strategy to cool the economy and bring down inflation.
Inflation skyrocketed to 9.1% in June 2022, a 40-year high, prompting the Fed to embark on the fast pace of interest rate increases in decades. The central bank last increased its benchmark rate in July 2023 and has held it at 5.3% since then.
Stocks were mixed after the release of the June CPI report with the Dow Jones Industrial Average higher and the S&P and NASDAQ trading lower.
The CPI report for June can be found here.
