Consumer price index falls more than expected to 3%

Inflation in the United States in June echoed the good news it had already delivered in May. According to data released Tuesday by the U.S. Department of Labor’s Bureau of Labor Statistics (BLS), the consumer price index (CPI) fell one-tenth more than expected last month to 3%, down from 3.3% in May. The more closely watched core CPI (excluding energy and food), which has been more resilient, also surprised in another way: it fell one-tenth to 3.3% month-on-month, while it was expected to remain at 3.4%. However, all market expectations were focused on the intermonth core CPI. Most were at 0.2%, which mimicked last month and suggested some easing. So the 0.1% rate recorded in June provides a positive surprise, which ultimately strengthens the likelihood that the market was already buying: The Federal Reserve is running out of excuses to start cutting interest rates at its September meeting..

Although the BLS reports figures to one decimal place, officials increasingly expand the numbers to get a fuller picture of the direction of inflation. In three-decimal terms, the core CPI rose 0.065% in June, when most analysts were close to 0.24%, the margin before a figure that can be rounded to 0.3%.

Looking at the categories that make up the US CPI, Great joy comes from home which, with its abrasive readings, prevented faster deflation. House prices, which are the largest category of services, rose 0.2% last month, the smallest increase since August 2021. Landlords’ equivalent rents — a measure of what they would pay owners if they lived on rent and the largest single CPI item — rose 0.3%, also the lowest in three years.

“With the June CPI data, we can take stock of the impressive US inflation for the first half of the year and expectations for the Fed’s interest rate policy. The first quarter was marked by unpleasant surprises rising inflation and a sharp revaluation of rates by the Fed, while the market cancelled almost all rate cuts planned for 2024. However, in the second quarter, the situation stabilized, and May inflation surprised with a decrease,” analysts from the Swedish bank SEB note. in anticipation of the US economy. In June, the inertia of May continued.

Although the Bureau of Labor Statistics (BLS) reports figures to one decimal place, officials increasingly expand the numbers to get a fuller picture of the direction of inflation. In three-decimal terms, the core consumer price index increased 0.065%.

The inflation data comes just a week after other big data that served as a catalyst for markets and offered a similar outlook. Last Friday Official Employment Report for June. Details of the Bureau of Labor Statistics (BLS) data confirmed the story of a gradual cooling of the labor market after months of shocking data in the wake of the pandemic. A downward revision of strong wage data for May, a decline in June, a drop below 4% in the dynamics of median income on an annualized basis for the first time in two years, and a rise in the unemployment rate to a symbolic level of 4% in the US They raised the stakes even more market view that the Fed will cut rates for the first time this cycle at its meeting September and that he will do it twice in 2024.

A vision that is different from what is presented Federal Reserve officials in their June quarterly forecasts, in which they telegraphed (the median of the famous dot plot (or dot plot) for this exercise, one cut was made, making it clear that it will occur later than September. Fed Chairman Jerome Powell avoided giving a timeline for a likely rate cut in his testimony to lawmakers this week, insisting that monetary policy actions would be guided by the data released.

The Fed’s silence was further limited by the market on Thursday. Operators continue to place big bets in September, and euphoria is seen in bond yields. treasury bond both in two and in 10 years, falling (i.e. becoming more expensive) in T-note by about 10 basis points to 4.2%. Future Wall Street bounced back and dollar It fell more than 0.6% against the euro and more than 0.7% against sterling.

While the US economy is still far from recession, the impact of the sharp increase in growth (from just over 0% to over 5% in just one year) is starting to be felt, with gross domestic product (GDP), for example, already showing a markedly lower reading than before, at 1.3% year-on-year in the first quarter. This gives the Fed the opportunity to start easing its restrictions, as the European Central Bank (ECB) has done on this side of the Atlantic.