After two years of painfully high prices, inflation in the United States has reached its lowest point since 2012, standing at 3% in June compared to the previous 12 months. This indicates that the Federal Reserve's interest rate hikes have steadily curbed the rise in prices across the economy.
The inflation figure reported by the government on Wednesday marked a significant decline from the 4% annual rate recorded in May, although it remains above the Federal Reserve's 2% target. Over the past 12 months, the price of gasoline has decreased, food prices have risen more slowly, and the cost of used cars has dropped.
From May to June, general prices rose by 0.2%, compared to 0.1% in the previous month, but in comparative terms, it remains mild.
At the same time, core inflation remains persistently high and a lingering concern for the Federal Reserve, which is likely to raise its key interest rate again when it meets in two weeks. Since March 2022, the Federal Reserve has raised its benchmark interest rate by 5 percentage points, the fastest pace of increases in four decades.
The June year-on-year inflation figure marked the smallest increase since March 2021, when the current streak of painfully high inflation began as the economy emerged from the pandemic recession.
However, with most inflation measures still uncomfortably high, the Fed does not appear willing to halt its rate hikes. The expected increase later this month will come after the central bank's decision to pause its rate hikes last month, following 10 consecutive increases. Fed policymakers have indicated that they may raise rates again at their next meeting in September.
Some economists have suggested, however, that if inflation continues to slow down and the economy shows enough signs of cooling, the July hike could be the Fed's last.