The Federal Reserve’s preferred inflation gauge showed minimal price increases in June, adding to evidence that inflation is steadily easing and potentially paving the way for interest rate cuts this fall.
The Commerce Department reported a 0.1% rise in prices from May to June, with year-over-year inflation falling to 2.5%. Even excluding volatile food and energy prices, core inflation saw a modest increase of 0.2%.
This latest data reinforces the belief that the four-decade high inflation streak, which peaked two years ago, is nearing its end. Fed Chair Jerome Powell has expressed increased confidence in inflation returning to the target level of 2%.
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The prospect of lower interest rates and easing inflation, combined with a strong job market, could positively influence Americans’ economic outlook and potentially impact the upcoming presidential election. However, with a cooling job market and steady economic growth, the Fed is likely to proceed cautiously and wait for more data before making any rate cut decisions.
Despite the encouraging inflation trend, the cost of everyday necessities like groceries, gasoline, and rent remains elevated compared to three years ago, a factor that has negatively affected public opinion on the Biden-Harris administration’s economic management.
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Overall, the economy continues to expand steadily, with the U.S. reporting a 2.8% annual growth rate in the second quarter. Job growth remains positive, primarily concentrated in healthcare and government sectors, and the unemployment rate has ticked up slightly to 4.1%.
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