Inflation cooled more than economists expected in June, with consumer prices rising 3.5% from a year earlier, down from 4.2% in May, according to the Bureau of Labor Statistics. The report came just before Federal Reserve Chair Kevin Warsh told lawmakers that the central bank is still focused on bringing inflation back to its 2% goal.
Much of the slowdown reflected lower energy costs. The BLS said energy prices fell 5.7% last month, while gasoline prices dropped 9.5%. Prices excluding food and energy were flat for the month and were up 2.6% over the past 12 months.
Warsh, speaking to the House Financial Services Committee for the first time as Fed chair, said the latest inflation reading was encouraging but not enough to declare victory. He said the fight against elevated prices is still in its early stages and that policymakers are united in their commitment to the 2% target. He also noted that a June meeting of central bank governors and district bank presidents showed no appetite for accepting higher inflation.
The softer CPI data led traders to trim expectations for a rate increase at the Fed’s July 28-29 meeting. Fifth Third Commercial Bank Chief Economist Bill Adams said the report may give policymakers room to hold rates steady in July, though he cautioned that more positive inflation data will be needed to rule out hikes later in the year. Warsh also said the labor market remains broadly stable, pointing to steady job creation, relatively few layoffs, modest changes in job vacancies and solid nominal wage growth.
Source: retaildive.com
