Consumer prices dropped in June for the first time in four years

The average cost of goods and services in the country dropped last month for the first time since May 2020. The Consumer Price Index (CPI) dipped 0.1% in June after being unchanged in May, the Labor Department said yesterday, suggesting that high inflation is easing.

Core inflation, excluding volatile food and energy prices, saw its slowest growth since January 2021 with gasoline prices down by 3.8% and used vehicle prices by 1.5%.

The drop has helped slow the annual inflation rate to 3% from 3.3 % in May.

The report also showed easing housing costs. The shelter index rose 0.2% in June, the slowest monthly increase in three years.

Inflation effects
According to CNN, inflation in the last four years has taken the overall CPI to roughly 20%. And the sticker shock is visible in Americans’ spending habits. PepsiCo reported a 4% drop in US sales volume in the latest quarter. The dip implies a pullback in overall spending, not just big-ticket items like restaurants, concerts or travel.

But the latest data suggests Fed may cut rates
The better-than-expected report bolsters economists’ hopes that Federal Reserve Chair Jerome Powell may reduce rates sooner.

Earlier this week, Powell hinted at a possible rate cut in September if the central bank sees a continuous slowing of the economy. The benchmark policy interest rate has been held at a record high of 5.25% to 5.5% for over a year.

The Federal Reserve’s next policy meeting is on July 30–31.

Additional data, such as the Personal Consumption Expenditures Price Index, will influence their decision.