US Inflation Declines for Third Consecutive Month, Opening Possibility for Fed to Reduce Interest Rates

Inflation in the United States decreased for the third month in a row in June, suggesting that the most significant price surge in four decades is gradually subsiding. This trend could lead to the Federal Reserve considering interest rate cuts soon.

According to a recent report from the Labor Department, consumer prices dropped by 0.1% from May to June, following a flat performance in the previous month. This marks the first monthly decline in overall inflation since May 2020, during the height of the pandemic-induced economic shutdown.

On an annual basis, prices increased by 3% in June, a slight improvement from the 3.3% rise recorded in May.

These recent inflation figures are likely to reassure Federal Reserve policymakers that inflation is moving closer to their 2% target. Earlier this year, a brief resurgence in inflation caused officials to revise their expectations for potential interest rate cuts. The policymakers had indicated that they needed to observe several months of moderate price increases before feeling confident enough to lower the key interest rate, which is currently at its highest level in 23 years.

The June data represents another positive sign that the central bank has been looking for. If inflation remains low throughout the summer, many economists predict that the Federal Reserve may start reducing its benchmark interest rate as early as September.