Consumers have suffered the worst bout of inflation since the 1970s, and it’s just beginning to look like some relief is coming their way. Gwynn Guilford reports for The Wall Street Journal:
Inflation cooled last month to its slowest pace in more than two years, giving Americans relief from a painful period of rising prices and boosting the chances that the Federal Reserve will stop raising interest rates after an expected increase this month.
The consumer-price index climbed 3% in June from a year earlier, the Labor Department said Wednesday, sharply lower than the recent peak inflation rate of 9.1% in June 2022, when gasoline prices hit a U.S. record average of $5 a gallon.
The June rate declined from 4% in May. Inflation was last close to 3% in March 2021.
“After a punishing stretch of high inflation that eroded consumer’s purchasing power, the fever is breaking,” said Bill Adams, chief economist at Comerica Bank.
Consumers paid less last month for used cars and airline fares, and their rent increased at the slowest one-month pace since early 2022. Prices for car insurance and recreation services rose.
Investors cheered the figures, which affirmed the Fed was making progress in its work to stem high inflation. Stocks rose, and bond yields fell.
Fed officials are on track to raise rates to a 22-year high at their July 25-26 meeting because economic activity hasn’t slowed down as much as anticipated. But the inflation report calls into question whether the Fed will lift rates after that, as most officials projected last month.
“My guess is that they’re so locked in on another increase in July that they’ll go ahead with that,” said David Wilcox, senior economist at Bloomberg Economics and the Peterson Institute for International Economics. “The main effect it will have is to really fortify the argument around July’s hike being the last of this campaign.”
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