US inflation cools to slowest pace in a year

Price rises in the US cooled in June, building hopes that the world’s largest economy is moving on from the bout of high inflation that hit after the pandemic.

Prices rose 3% over the 12 months to June, as lower energy prices helped to deliver the slowest price inflation in a year, the Labor Department said.

It marked the third month in a row that inflation has fallen, easing financial pressures on households and potentially clearing the way for the US central bank to cut interest rates as soon as September.

The Federal Reserve’s key lending rate currently stands at more than 5.3%, a roughly two-decade high.

Fed officials say high borrowing costs are weighing on the economy, helping to reduce the pressures pushing up prices.

Analysts said the latest report could help to convince the bank that it has done enough to cure the problem.

From May to June, prices actually dropped 0.1% – the first outright monthly decline in years.

“The latest inflation numbers put us firmly on the path for a September Fed rate cut,” said Seema Shah, chief global strategist at Principal Asset Management.

The progress is welcome news for the White House, which has struggled with widespread economic dissatisfaction as the jump in living costs and interest rates squeeze households.

Over the past year, petrol prices and the cost of cars have fallen, but the cost of other staples has continued to rise.

Grocery prices are up 1.1% since June 2023, while housing costs have climbed 5.1%.