There was more encouraging news regarding inflation as June’s Consumer Price Index (CPI) fell 0.1% from May. This marked the first monthly decline since the start of the pandemic and helped push the annual reading lower from 3.3% to 3%. Core CPI, which strips out volatile food and energy prices, increased 0.1% for the month while the annual reading declined from 3.4% to 3.3%.
All these measures were softer than estimates, as moderating gasoline and shelter costs were key reasons for the friendly numbers.
What’s the bottom line? Remember, the Fed hiked its benchmark Fed Funds Rate eleven times between March 2022 and July 2023 to a two-decade high to fight inflation, which peaked at 9.1% in 2022. Their goal with this series of hikes was to slow borrowing and spending so pricing pressure would shrink and inflation would come under control.
The Fed has repeatedly said that they do not plan to cut rates until members have gained greater confidence that annual inflation is moving sustainably toward their 2 percent target. Fed Chair Jerome Powell reiterated this sentiment last Tuesday and Wednesday during his Semiannual Monetary Policy Report to Congress, which occurred ahead of Thursday’s CPI release (more on his testimony below).
June’s CPI data followed better than expected numbers in both April and May, giving the Fed another welcome sign that inflationary pressures are easing, especially after readings in the first quarter of this year were unexpectedly high.
