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Inflation in U.S. drops as consumer prices unexpectedly fell in June | CBC News
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U.S. consumer prices unexpectedly fell and the annual increase was the smallest in a year, reinforcing views that a trend of dropping inflation was back on track in the United States, and drawing the Federal Reserve another step closer to cutting interest rates.
The consumer price index dipped 0.1 per cent last month after being unchanged in May, the U.S. Labour Department’s Bureau of Labour Statistics said on Thursday. It was the second straight month of tame CPI readings, and could help to bolster confidence among officials at the U.S. central bank that inflation was cooling.
In the 12 months through June, the CPI climbed three per cent and followed a 3.3 per cent advance in May. Economists polled by Reuters had forecast the CPI ticking up 0.1 per cent and gaining 3.1 per cent year-on-year.
In Canada, the annual inflation rate edged up to 2.9 per cent in May — an increase from 2.7 per cent in April — mostly due to higher prices for services. The numbers in this country for June 2024 are expected on July 16.
The annual increase in consumer prices has slowed from a peak of 9.1 per cent in June 2022. The U.S. CPI is running far ahead of the measures tracked by the Fed for its two per cent inflation target. The Personal Consumption Expenditures (PCE) price indexes both increased 2.6 per cent in May.
Fed Chair Jerome Powell has acknowledged the recent improving trend in price pressures, but told lawmakers this week he was not yet ready to declare inflation had been beaten, and that “more good data would strengthen” the case for rate cuts.
A cooling labour market and slowing economy have left financial markets and most economists expecting the Fed to start its easing cycle in September.
The U.S. central bank has maintained its benchmark overnight interest rate in the current 5.25 per cent to 5.50 per cent range since last July. It has hiked its policy rate by 525 basis points since 2022.
Meanwhile, the Bank of Canada already cut lending rates from five per cent to 4.75 per cent on June 5.