US consumer prices fell in June for the first time since the early months of the pandemic, dropping 0.1% from May. Annual inflation eased to 3% from 3.3%, leading investors to increase bets on a Federal Reserve rate cut in September. Wall Street’s expectations for a September rate cut rose to 93% from 73% following the data release. This slowdown in inflation, coupled with a cooling labour market, suggests the Fed could begin easing rates soon.
Ron Temple, chief market strategist at Lazard, and BNP Paribas economists both foresee a rate cut in September, with two quarter-point cuts expected in 2024. Fed Chair Jerome Powell acknowledged moderated inflation and a strong labour market but did not hint at specific timing for rate cuts during his congressional testimony. Prices fell for gas and cars, while core inflation excluding energy and food also slowed. The Consumer Price Index dropped 0.1% from May, helping slow annual inflation to 3%, the lowest since June 2023.
