There has been significant progress made on the inflation front, and today’s report confirmed that … inflation is finally cooling.Chief investment officer at Key Private Bank, George Mateyo, on the Consumer Price Index (a helpful data point on the state of inflation) report for June, which the U.S. government released on Wednesday.
Why It Matters: On Wednesday, the U.S. Bureau of Labor Statistics released economic data for the month of June reflecting consumer prices increasing at a pace of 3% from June 2022 to June 2023; this measure is less than economists expected and shows inflation increasing at its "lowest annual rate in more than two years" (CNBC). Core inflation – which is seen as a better gauge of inflation because the measure strips out food and energy prices, which can be volatile – showed prices increasing at a pace of 4.8% year-over-year, while climbing 0.2% from May to June, "the smallest one-month increase since August 2021, suggesting underlying price pressures are gradually easing" (The Wall Street Journal).
Big Picture: While inflation is lower than the 40-year high seen last summer, it is still above the Federal Reserve's 2% target rate. Since March of 2022, the Fed has increased its benchmark interest rate (which impacts other borrowing costs) 10 times to combat rising prices. Federal Reserve officials have signaled that they will likely raise rates at their next meeting in late July, and while this new data on inflation is largely seen as a positive sign, it is not expected to change the Fed's decision.
More Details: Categories which saw price increases in June include shelter (rent, housing), motor vehicle insurance, and apparel. Price decreases were seen categories including airline fares, used vehicles, and household furnishings and operations. Food prices increased 5.7% year-over-year, while the price of eggs decreased 7.9% year-over-year and 7.3% from May to June.
Full U.S. Bureau of Labor Statistics Report Here: Consumer Price Index Summary
by Jenna Lee,