US inflation sharply cooled last month, offering fresh hope that the Federal Reserve can soon wrap up the most aggressive interest-rate hikes in decades.
The consumer price index rose 3% last month from a year ago, the smallest advance in more than two years, according to data out Wednesday from the Bureau of Labor Statistics. Excluding food and energy, the core CPI — which economists view as the better indicator of underlying inflation — advanced 4.8%, also the lowest since 2021.
Both measures climbed 0.2% from May, less than economists expected.
Treasury yields plummeted, the S&P 500 opened higher, and the dollar slid following the report. The chances of an additional Fed rate increase after this month slipped to well below 50%.
The figures underscore the progress of reducing price pressures since inflation peaked a year ago, aided by more than a year of interest-rate hikes and easing demand. Even so, price pressures are running well above the Fed’s target and will keep policymakers inclined to resume raising interest rates at their July 25-26 meeting.
“Inflation is too high. Our target’s 2%,” Richmond Fed President Thomas Barkin said at an event Wednesday after the report. “If you back off too soon, inflation comes back strong, which then requires the Fed to do even more.”
