US Inflation Slows to 3% in June

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Facts

  • US annualized inflation cooled to 3% in June, down from 3.3% in May, according to Thursday's report by the Labor Department. Meanwhile, monthly consumer prices fell 0.1%, marking the first decline in the Consumer Price Index (CPI) since May 2020.1
  • While core inflation, calculated without volatile food and energy prices, rose 0.1%, a steep fall in gasoline and overall energy costs dragged down the headline CPI.2
  • Thursday's CPI report beat Bloomberg economists' forecast of 3.1%, with some analysts predicting this could prompt the Federal Reserve to lower its bench rate, which is still held at around 5.50%.3
  • Testifying before Congress this week, Fed chair Jerome Powell says that the central bank needs to see more 'good data' before lowering rates. However, he noted that inflation need not fall to the targeted 2% for the Fed to cut rates.4
  • This comes as the unemployment rate moved up to 4.1% in June, increasing by 0.1% in both April and May.5
  • On Thursday, the fall in inflation reportedly pushed all three major US stock indexes — Dow Jones, S&P 500, and Nasdaq — into positive territory.6

Sources: 1CNBC, 2Bloomberg, 3Ft, 4Yahoo Finance, 5The Hill and 6CNN.

Narratives

  • Democratic narrative, as provided by New York Times. Thursday's report highlights the success of Bidenomics, showing the economy's resilience and progress. Despite predictions of a recession and the need for high unemployment to curb inflation, the US has experienced robust growth, low unemployment, and falling inflation.
  • Republican narrative, as provided by PJ Media. Despite a slight decline to a 3% annual rate, many Americans remain frustrated by years of high prices. While the Fed may cut rates soon, the effects of prolonged inflation and elevated interest rates linger. The core inflation rate, at its lowest since April 2021, isn't enough to reverse consumer hardships.

Predictions