Inflation in the US has decreased to its lowest level in over two years, falling to 3% in June from a year earlier, a sign that the Federal Reserve’s interest rate hikes have steadily restrained price increases throughout the economy after two years of excruciatingly high prices.
The government’s estimate of inflation on Wednesday was significantly lower than the 4% annual rate announced in May, but it was still more than the Fed’s target rate of 2%.
Gas prices have decreased, grocery prices have increased gradually over the past 12 months, and used cars are now more affordable.
Overall prices increased by 0.2% from May to June, which is a slight increase from the previous month’s 0.1% increase but still quite modest.
However, underlying inflation continues to be consistently high and a source of worry for the Fed, which will almost certainly raise its benchmark interest rate once again when it meets in two weeks.
Since March 2022, the Fed has increased its benchmark rate by a significant 5 percentage points, the fastest rate of hikes in four decades.
Since March 2021, when the current round of excruciatingly high inflation started as the economy burst out of the pandemic slump, the year-over-year inflation statistic for June represented the mildest such increase.
However, the Fed barely seems prepared to stop raising rates given that the majority of inflation gauges remain uncomfortably high.
Its anticipated rate increase later this month comes after the central bank decided to stop rate increases last month after 10 straight increases.
The Fed’s decision-makers have hinted that they may raise rates once more in September at their next meeting.
The July rise, though, might be the Fed’s final one if inflation continues to slow and the economy exhibits enough symptoms of softening, according to some economists.
For instance, used car prices have decreased.
Due to the decrease in supply bottlenecks, automakers are now producing more vehicles. As a result, new-car costs have also started to decline.
American households that have been squeezed by the price acceleration that started two years ago may notice a significant improvement in their situation if inflation slows down over the long term.
As a result of three rounds of stimulus checks, consumers increased their spending on products like exercise bikes, standing workstations, and new patio furniture, which caused inflation to soar.
Supply chains were overburdened by the surge in consumer demand, which also sparked inflation.
Numerous experts have hypothesized that the March 2021 stimulus package signed by President Joe Biden accelerated the inflation spike. However, inflation also increased abroad during the same period, even in nations where far less stimulus was implemented.
The Russian invasion of Ukraine also led to an increase in food and energy costs worldwide.
However, after reaching a $5 record last year, gasoline prices have since dropped to an average national price of roughly $3.50 per gallon.
And the cost of groceries is rising more gradually, with certain categories experiencing a reversal of past surges.
According to official data, egg costs, for instance, have decreased to a national average of $2.67 per dozen from a peak of $4.82 at the beginning of this year.
After the avian flu ravaged the country’s chicken flocks, egg prices skyrocketed. Despite the drop, they are still more expensive than the pre-pandemic average of roughly $1.60.
Despite having dropped from their peaks, the prices of milk and ground beef are still high.
Nevertheless, prices for services like dining out, auto insurance, daycare, and dental care are rising quickly.
The average cost of car insurance has increased by 17% over the past 12 months.
JOIN US ON WHAT'SAPP, TO GET INSTANT STATUS UPDATES AND BE IN THE KNOW.
CLICK HERE
