June saw a small increase in US consumer prices; core inflation is slowing

13 Jul 2023 , 10:53 AM

The Federal Reserve is likely not going to be deterred from starting to raise interest rates later this month despite the fact that US consumer prices increased modestly in June and marked their smallest annual increase in more than two years as inflation continued to decline.

The CPI increased by 0.2% in June after nudging up by 0.1% in May, the Labour Department reported on Wednesday. Rent increases and increases in gasoline prices helped the CPI rise, offsetting a decline in the cost of used cars.

The CPI increased by 3.0% in the year that ended in June. It came after a 4.0% gain in May and was the smallest year-over-year growth since March 2021.

As the substantial increases from last year are excluded from the computation, annual consumer prices have sharply declined from their 9.1% peak in June 2022, which was the greatest increase since November 1981. Despite the tight labour market, inflation is still significantly higher than the Fed’s goal rate of 2%.

In June, the U.S. central bank kept interest rates unchanged. Since March 2022, when it began its quickest monetary policy tightening campaign in more than 40 years, the Fed has increased its policy rate by 500 basis points.

A slowing of the rate of increase in underlying prices underlined the better inflation environment.

The CPI rose 0.2% in June when volatile food and energy prices were excluded. The so-called core CPI failed to record monthly growth of at least 0.4% for the first time in six months. The core CPI increased by 4.8% in the year ending in June after rising by 5.3% in May.

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