WASHINGTON–Inflation is cooling faster than many had expected, with one credit union economist saying the newest data makes it even more likely the Fed will move to cut interest rates this year.
The consumer price index (CPI) data released by the federal government show that core prices, which exclude food and energy items, rose just 0.1% since May, the smallest increase since January 2021.
Core inflation was 3.3% over the previous year, also the lowest since 2021, the CPI data show.
"June headline prices fell for the first time in over two years due to declines in energy and vehicles prices and substantial cooling in shelter price increase,” Dawit Kebede, chief economist with America’s Credit Unions, said in a statement. “This is great news when combined with last week's report on labor market moderation to consider more relaxation on monetary policy than anticipated.
“The federal funds rate dot plot from the June summary of Projections indicates that the Federal Open Market Committee (FOMC) members are split on one or two rate cuts this year,” Kebede continued. “If the trend in inflation in the previous two months continues, the likelihood of having two rate cuts this year increases."
‘Door Wide Open’
In its analysis, the Wall Street Journal agreed with Kebede’s view, stating that “another month of very mild inflation keeps the door wide open to a September interest-rate cut, especially if Fed officials conclude the labor market is slowing in a way that either diminishes a potential source of ongoing inflation or risks further unwelcome weakness.”