While this was happening, household expenditure increased more slowly than it had in April.
Less money chasing after purchases would relieve inflation pressure considerably.
Due to declining energy costs, an inflation indicator that the Federal Reserve pays special attention to dropped in May. However, a fundamental measure of price increases remained high.
June Sees Slower Consumer Price Growth
According to the Commerce Department, consumer prices grew 3.8% overall in June from a year earlier, which was a slower rate than the 4.3% pace in April and the 40-year high of 7% in June 2022.
Since April 2021, that is the weakest annual gain.
The personal consumption expenditures price (PCE) index shows that prices increased by 0.1% on a monthly basis after rising by 0.4% the previous month.
Food prices increased by just 0.1% while energy prices, including gasoline, dropped by 3.9%.
Overall, not much here will prevent the Fed from raising rates again at the late-July meeting, according to Capital Economics, economist Andrew Hunter.
However, we continue to believe that it will turn out to be the last given the slowing of both core inflation and consumer growth.
A price index that excludes erratic food and energy costs rose by 0.3%, somewhat less than the increase seen the previous month.
The so-called core price increase was reduced from 4.7% in the previous month to 4.6% as a result.
Persistent Core Inflation Raises Concerns for Federal Reserve
Less money chasing after purchases would relieve inflation pressure considerably.
Despite the fact that inflation as a whole has been gradually declining, the Federal Reserve is more concerned with core prices since they more accurately represent long-term trends.
Despite a slowdown, core inflation is still persistently high due to significant price rises in rent, used vehicles, hotels, health care, and insurance.
As a result, Fed officials decided to take a break from their aggressive interest rate increases in June to monitor the impact on the economy.
However, they also hinted that if core prices continue to rise, rate hikes will likely resume in July.
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