Wednesday’s Consumer Price Index (CPI) report had some promising news for US households: It shows that inflation remains above ideal levels but is slowing, suggesting price increases are easing across certain industries.
According to the report, which compares the cost of goods for urban consumers — like food and housing — over time, overall CPI was up 0.2 percent in June relative to May, and 3 percent compared to June 2022. That’s the lowest the annual rate of inflation has been in months, and represents a steep decline from the annual rate last June, when it was at 9.1 percent.
Core inflation (which takes the same goods as CPI into account but removes food and energy prices due to their volatility) remains slightly higher, however, at 4.8 percent year over year. Still, that’s the lowest core inflation has been since October 2021.
“Inflation is throttling back, particularly for staples such as gas [and] food, and this should continue in coming months,” Moody’s chief economist Mark Zandi told Vox. “The inflationary fallout from the pandemic and Russian war continues to fade away as these supply shocks are increasingly in the rearview mirror.”
WHOA! Headline CPI rose by only 0.2% in June, and is now down to only 3.0%. That’s back to the March ’21 level.
More importantly, core CPI rose only 0.2%, and is up 4.8% over the year.
BOTH measures are a good bit below expectations.
Inflation is returning to normal rates.
— Justin Wolfers (@JustinWolfers) July 12, 2023
Economists don’t expect the CPI report to halt the Fed’s interest rate increases just yet, with officials poised to make another rate hike later this summer as they work to get inflation down to 2 percent. The CPI report, though, is among the recent developments that point favorably to the US skirting a recession and potentially more aggressive rate hikes moving forward.
Experts note that the economy hasn’t quite reached a “soft landing” — or state of low inflation…
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