Inflation slowed in June to an annual rate of 3%, the Bureau of Labor Statistics reported Wednesday, the 12th consecutive month of slowdown after prices hit historic highs last summer.
Every month, prices increased by 0.2%, lower than the 0.4% increase in May, according to the latest Consumer Price Index. The annual inflation rate in May was 4%.
“Core” inflation, which strips out volatile food and energy prices, fell to 4.8% in the year ending in June, BLS reported.
The cooling of inflation comes after the 10 consecutive interest-rate hikes by the Federal Reserve since March 2022, which has hit the housing market hard and raised the costs of consumer loans on items such as cars.
Inflation hit a four-decade high of 9.1% in June 2022 and gas prices soared, raising worries of a looming recession. Gas prices have fallen to a national average of $3.54 per gallon, compared with $4.66 a year ago, according to AAA.
The inflation rate is still above the Fed’s target rate of 2%, and the central bank has not yet signaled whether it will raise rates further at its next meeting on July 26. Many investors and analysts expect another slight increase in rates, with the labor market remaining tight.
Stocks traded higher on the inflation report.
After nearly two years of being blamed for high prices due to massive government spending, President Biden said Wednesday the lower inflation report was proof that his economic policies are working.
“Good jobs and lower costs: That’s ‘Bidenomics’ in action,” the president said.
National Economic Council Director Lael Brainard said inflation is moderating while the unemployment rate remains below 4%.
“Despite repeated forecasts that recession is just around the corner, the U.S. recovery is solid, and inflation is down,” she said at the Economic Club of New York. “The economy is defying predictions that inflation would not fall absent significant job destruction.”
She also revived the accusation that companies engaged in price gouging during the pandemic and called on them to stop.
“It will be important for corporations to continue to bring their markups back down after having raised them to unusually elevated levels over the past two years, which would help in reducing inflation,” she said.
Conservatives said the lower inflation rate is small consolation, on top of higher prices that have saddled household budgets for two years.
“The price of goods and services has risen by more than 16% over the course of President Biden’s term,” said Alfredo Ortiz, president of the Job Creators Network. “While inflation is finally coming back down, it remains far higher than the Federal Reserve’s target rate, and it’s important to remember today’s price increases are compounding off a much higher base. This high and sticky inflation is a direct result of Bidenomics, which emphasizes reckless government spending over free markets.”
Over the past 12 months, gas prices have dropped, grocery costs have risen more slowly and used cars have become less expensive.
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. Egg costs had soared after avian flu decimated the nation’s chicken flocks. Despite the price decline, eggs remain above the average pre-pandemic price of about $1.60.
Milk and ground beef prices 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, costs 17% more than it did a year ago.
The year-over-year inflation figure for June marked the mildest such increase since March 2021, when the current bout of painfully high inflation began as the economy roared out of the pandemic recession.
Used car prices, among other items, have been falling. Automakers are finally producing more cars as supply shortages have abated. New car prices, too, have begun to ease as a result.
A sustained slowdown in inflation could bring meaningful relief to American households that have been squeezed by the price acceleration that began two years ago. Inflation spiked as consumers ramped up their spending on items like exercise bikes, standing desks and new patio furniture, fueled by three rounds of stimulus checks. The jump in consumer demand overwhelmed supply chains and ignited inflation.
Many economists have suggested that President Biden’s stimulus package in March 2021 intensified the inflation surge. At the same time, though, inflation also jumped overseas, even in countries where much less stimulus was put in place. Russia’s invasion of Ukraine also triggered a spike in energy and food prices globally.
• This story is based in part on wire service reports.
• Dave Boyer can be reached at dboyer@washingtontimes.com.
Please read our comment policy before commenting.