Business

US annual inflation slows in June, spending surges

Fed chair says rates may be raised again in September

Reuters July 29, 2023

The research head was of the view that the critically low foreign exchange reserves would not allow improvement in the rupee-dollar exchange rate. photo: file

WASHINGTON:

US annual inflation logged its smallest increase in more than two years in June, with underlying price pressures moderating, a trend that, if sustained, could push the Federal Reserve closer to ending its fastest interest rate hiking cycle since the 1980s.

The improving inflation environment was underscored by other data on Friday showing labour costs rose at their slowest pace in two years in the second quarter as wage growth cooled. Receding inflation has raised cautious optimism of a “soft landing” for the economy envisaged by Fed officials rather than the recession that most economists have been predicting.

The US central bank on Wednesday raised its policy rate by 25 basis points to the 5.25%-5.50% range, a level last seen just prior to the 2007 housing market crash and which has not been consistently exceeded for about 22 years.

“The Fed must make more progress, but inflation rates are falling, which at the margin reduces the likelihood of a September rate hike,” said Conrad DeQuadros, senior economic advisor at Brean Capital in New York.

The personal consumption expenditures (PCE) price index increased 0.2% last month after edging up 0.1% in May, the Commerce Department said. Food prices dipped 0.1% while the cost of energy increased 0.6%. In the 12 months through June, the PCE price index advanced 3.0%. That was the smallest annual gain since March 2021 and followed a 3.8% rise in May.

Published in The Express Tribune, July 29^th, 2023.

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