Last month, with the help of more affordable used automobiles, the US’s rate of price increase slowed to its lowest level in more than two years. Data show that inflation increased from 4% in May to 3% in the year ending in June.

The most recent reading of inflation indicates the smallest rate since March 2021. Inflation peaked at more than 9% in June 2022 and has subsequently dropped substantially. The data suggests that rising interest rates have slowed down the rise in prices.

Analysts still anticipated that the US Federal Reserve would increase interest rates this month.

The US inflation reduction in June, according to Brian Coulton, chief economist at Fitch Ratings, was “really only a small step in the right direction.”

“In the context of a still tight labour market and sticky wage growth, the Fed’s recent concerns about inflation persistence are not going away, ” he said.

According to the Labour Department, increasing housing expenses were the main cause of the increase in US inflation in June.

While the cost of food items like pork, milk, and eggs decreased, used car and truck prices decreased. After the war in Ukraine impacted the world’s food supply, many households were dealing with higher shopping expenditures.

The results highlight how quickly the US has made success in containing price increases, especially when compared to the UK, where inflation touched 8.7% in the year to May despite several increases in interest rates.

The US economy is more agile than the UK economy, according to Danny Blanchflower, a current professor of economics at Dartmouth and a former member of the Bank of England’s rate-setting committee.

He claimed that Brexit had hurt the UK economy and had made it more challenging for businesses to change their supply networks to more affordable ones.

“There’s been a Covid shock for everybody and there’s been a war shock for everybody,” he said. “The question is what distinguishes the UK from everywhere else and I would say the answer is Brexit.”

Since March of last year, the US central bank has increased interest rates from almost zero to 5% in an effort to calm the economy and relieve pressures that had been driving up prices.

The Federal Reserve’s policymakers have hinted that they will likely boost interest rates once more this month, and many anticipate additional rises later in the year.

The so-called core inflation has been cited as a source of concern by officials. Food and energy expenditures are excluded from this calculation because they fluctuate from month to month.

Core inflation is showing indications of slowing down, but at a rate that would still cause it to exceed the bank’s 2% target.

However, the most recent US Labour Department data revealed core inflation to be lower than anticipated. The smallest increase since August 2021 was a 0.2% increase between May and June.

Core inflation decreased from 5.3% in the year to May to 4.8% in the year to June.

Investors speculated that the news indicated that the Fed would be able to cease rising rates soon, which caused stocks to open higher and the currency to decline after the report.

Paul Shmotolokha, the company’s owner, claimed that his company, New Use Energy Solutions, based in Arizona, was still coping with the effects of past price increases.

Paul claimed that the price hikes had put pressure on his company, which develops and produces battery and solar system, to boost pricing. It happens at a time when prospective customers are examining their expenditures more closely due to growing living expenses.

“It’s good news looking forward but it doesn’t rectify all of the inflation that we’ve experienced for the last several years,” he added. “I think it needs another month or two… to have businesses breathe a sigh of relief.”

(Adapted from BBC.com)

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