(Updated with details, market reaction)
WASHINGTON, July 12 (Reuters) – U.S. consumer prices edged up in June and headline inflation posted its weakest one-year increase in more than two years, data from labor department.
The headline consumer price index rose 0.2% in June, after 0.1% in May, as higher fuel prices and rents offset lower prices for used motor vehicles.
Year-on-year, the CPI rose 3.0%, the lowest year-on-year increase since March 2021, after rising 4.0% a month earlier.
Economists expected slightly larger increases for the month of June, of 0.3% over one month and 3.1% over one year.
Inflation excluding food and energy stood at 0.2%, an increase which follows a gain of 0.4% in May. Over one year, this “core” index rose by 4.8% last month, after +5.3% a month earlier.
The Reuters consensus gave it at 0.3% over one month and 5.0% over one year.
Inflation has fallen sharply since peaking at 9.1% in June 2022. Nonetheless, it remains well above the Federal Reserve’s 2% target.
The financial markets are therefore anticipating that the central bank will raise interest rates by 25 basis points during its monetary policy meeting on July 25 and 26.
But this rate hike, if it happens, could be the last. Futures now price in a 25% chance of another Fed Funds rate hike between July and the end of the year, up from 35% before the inflation data was released.
Core inflation should continue to moderate in the coming months, the labor market is showing signs of easing and independent indicators point to a downward trend in rental prices.
The ISM index of prices paid by businesses in services, considered by economists to be a good indicator of PCE inflation, fell in June to its lowest level since March 2020.
With expectations of an end to the Fed’s rate hike cycle after the July meeting, US government bond yields fell sharply as the dollar lost ground against a basket of benchmark currencies.
Wall Street index futures suggested a positive open, 0.7% for the S&P-500.
(Lucia Mutikani, French version Laetitia Volga, edited by Kate Entringer)
2023-07-12 13:04:42
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