The inflation rate in the US has fallen to its lowest level in more than two years. Consumer prices rose by only 3.0 percent in June. In May, the inflation rate was 4.0 percent.
In the USA, inflation weakened noticeably again in June. The main reason is the falling energy prices, which have fallen to their lowest level in more than two years. Consumer prices (Consumer Price IndexCPI) rose by 3.0 percent compared to June last year, as announced by the US Department of Labor in Washington.
Legend: Food and energy prices continued to fall in the US. Keystone/AP Photo, Rick Bowmer
In May the rate was 4.0 percent. It thus reached its lowest level since March 2021, but still above the Federal Reserve’s (Fed) target of 2.0 percent.
Core rate remains high
However, the danger of inflation with rising prices has not yet been averted. This is shown by the development of the so-called core rate, which does not take into account the volatile prices for energy and food. Although this core rate fell from 5.3 to 4.8 percent, it remains high. It shows the general price trend better than the general inflation rate.
The end of inflation in the US?
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Legend: Jens Korte SRF
Consumer prices in the US have now fallen to their lowest level since March 2021. Wall Street reacted positively at the start. With the core rate, excluding food and energy, still at 4.8 percent, there is a high probability that the US Federal Reserve will hike interest rates by another 25 basis points. But that might have been it if there weren’t a sudden rebound in inflation. The US labor market in particular is still very robust, which means some wage inflation. Wall Street initially reacted to these numbers midweek with significant gains.
The core rate is considered a good indicator of fundamental inflation trends and is therefore closely monitored by the US Federal Reserve. The Fed is expected to raise interest rates again at the end of July in order to achieve the target of an inflation rate of two percent.
Stock exchanges react positively
On the financial markets, the US dollar reacted to the new inflation data with losses. Capital market interest rates fell on the bond markets, and the stock exchanges reacted positively. The background is that rising key interest rates have a dampening effect on inflation. For the economy, however, they represent a burden due to more expensive loans. If inflation goes down, the Fed has to step less on the brake on interest rates, which pleases the economy and the stock market.