JULY 17, 2023 — INFLATION GROWTH SLOWS TO 3 PERCENT IN JUNE
Inflation in the US rose a mere 0.2 percent for the month of June, and was up 3 percent year-over-year, the smallest increase since March 2021. The core CPI, excluding food and energy, increased 0.2 percent for the month and 4.8 percent year-over-year. The annual rate was the lowest since October 2021. The Fed has targeted a 2 percent inflation rate, and the core CPI is still running at more than double, so the Fed’s work is not yet done. The CPI peaked at 9.1 percent annually in June 2022.
Traders are still expecting the Fed to raise rates by 0.25 percent at their meeting on July 25-26. However, with the inflation rate slowing; now that the series of 10 interest rate increases seems to be working through the market; it is likely the Fed will wait and see if the downward trend continues before making further policy changes. With the labor market holding steady and the much-anticipated shallow recession not happening, it seems the Fed’s decision making was sound.