June's Inflation Number Is a Welcome One

At 3%, it's lowest since March 2021
By Newser Editors and Wire Services
Posted Jul 12, 2023 8:55 AM CDT
Inflation Drops to Lowest Level in More Than 2 Years
Laptop computers are displayed in a Costco warehouse Monday, June 6, 2023, in Colorado Springs, Colo. On Wednesday, the Labor Department reports on U.S. consumer prices for June.   (AP Photo/David Zalubowski)

After two years of painfully high prices, inflation in the United States has reached its lowest point since March 2021—3% in June compared with 12 months earlier—a sign that the Federal Reserve's interest rate hikes have steadily slowed price increases across the economy, reports the AP. The inflation figure the government reported Wednesday was down sharply from a 4% annual rate in May, though still above the Fed's 2% target rate. From May to June, overall prices rose 0.2%. CNBC reports the Dow jumped 200-plus points on the news; economists had expected increases of 3.1% and 0.3%, respectively.

Gas prices have fallen back to about $3.50 a gallon on average, nationally, down from a $5 peak last year. And grocery prices are rising more slowly, with some categories reversing previous spikes. Egg prices, for instance, have declined to a national average of $2.67 a dozen, down from a peak of $4.82 at the start of this year, according to government data. Despite the decline, they remain above the average pre-pandemic price of about $1.60. Milk and ground beef remain elevated but have eased from their peak prices. Still, the cost of services, like restaurant meals, car insurance, child care, and dental services, continue to rise rapidly. Auto insurance, on average, now costs 17% more than it did a year ago.

At the same time, some underlying inflation pressures remain high and a nagging concern for the Fed, which is all but certain to increase its key interest rate again when it meets in two weeks. The Fed has raised its benchmark rate by a substantial 5 percentage points since March 2022, the steepest pace of increases in four decades. Its expected hike this month will follow the central bank's decision to pause its rate increases last month after 10 consecutive hikes. Some economists have suggested that if inflation keeps slowing and the economy shows sufficient signs of cooling, the July increase could be the Fed's last.

(More inflation stories.)

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