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Encouraging data: US year-on-year inflation falls to 3% in June

Encouraging data: US year-on-year inflation falls to 3% in June
Encouraging data: US year-on-year inflation falls to 3% in June

The consumer price index, a broad measure of the costs of goods and services across the U.S. economy, fell 0.1 percent from May to June, putting the annual rate at 3 percent, roughly its lowest level in more than three years, the Labor Department reported Thursday.

As analyzed by Balanz Capital, housing inflation stood out, which stood at 0.2% m/m, ending with 4 consecutive months at 0.4%. S&P 500 futures advanced 0.3% after the data was known, reversing the 0.15% drop they showed at the beginning of the day and accentuating yesterday’s 1% advance of the index, which crossed 5,600 points.

“Treasury rates are generally depressed, although more noticeably in the 10-year bond, whose yield shows a fall of 10 basis points (bps) to 4.18%, accentuating yesterday’s average fall of 2 bps,” adds the broker from the city.

The year-over-year increase in the consumer price index was weaker than economists had expected, at 3.1%, according to forecasts compiled by Bloomberg, and followed a 3.3% rise in May.

The data, released by the Bureau of Labor Statistics on Thursday, come as the Fed seeks more evidence that inflationary pressures are easing in the world’s largest economy. Despite market expectations earlier in the year of as many as seven interest rate cuts in 2024, The Fed has kept its benchmark rate in a range of 5.25 to 5.5 percent, the highest since 2001.

But Jerome Powell said the job market was showing signs of cooling and officials were concerned about strangling the economy by keeping rates too high for too long. He added that decisions would be made “meeting by meeting.”

Inflation: Now that the market is analyzing

Before Thursday’s data, there were clear signs that the economy was cooling, but not enough to raise major fears of a recession, but enough to change the tone of Federal Reserve officials, who are sticking to their rhetoric about the risks of the economy slowing too much even as inflation remains above their 2% target.

Recent data on household consumption, construction spending and service sector activity have fallen short of economists’ expectations. This has lowered estimates for the pace of economic growth in the three months ending in June.

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The year-over-year increase in the consumer price index was weaker than economists had expected, at 3.1%, according to forecasts compiled by Bloomberg, and followed a 3.3% rise in May.

Although Powell did not specify when the Fed might cut interest rates, investors have recently focused their attention on the central bank’s Sept. 17-18 meeting, betting that officials could cut rates then and again in December.

For some time, many economists have expressed cautious optimism that inflation is on track to return to the Fed’s target, though the road could be slow and bumpy. A series of warmer-than-expected data earlier in the year caught Fed officials by surprise.

Source: Ambito

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