U.S. consumer prices rose 3% in June compared with a year ago, a marked drop in the inflation rate that was the smallest 12-month increase in more than two years, the government reported Wednesday.
A year ago, the U.S. inflation rate soared to an annualized rate of more than 9%, a four-decade high, but since then it has dipped steadily. Last month's figure is close to the 2% annual inflation rate sought by policymakers at the country's central bank, the Federal Reserve, and a further drop from the 4% annualized figure recorded in May.
The 3% annualized advance recorded in June was the smallest since March 2021 and affords U.S. consumers further financial relief, with the Bureau of Labor Statistics saying that prices for such diverse items as used cars, gasoline at service stations, meats and airfares dropped.
The Federal Reserve policymakers have steadily raised their benchmark interest rate over the last 16 months, boosting the cost of consumer and business borrowing in an effort to curb inflation. The Fed is expected to impose another rate increase later this month.
But with inflation now slowing, further rate increases could be delayed or curtailed.
The U.S economy, the world's largest, has remained resilient in the aftermath of the coronavirus pandemic, continuing to grow. Hundreds of thousands of new jobs have been added month after month and pushed the unemployment rate to a near five-decade low.
FILE - President Joe Biden delivers remarks on the economy, at the Old Post Office in Chicago, June 28, 2023.
Even so, voters have given President Joe Biden low marks for his handling of the U.S. economy because of the high inflation rate, which has squeezed family budgets, especially for the purchase of groceries and gas and monthly rental payments.
Biden, running for a second term in the November 2024 election, was quick to take credit for the lowered inflation rate.
"Good jobs and lower costs: That's Bidenomics in action," he said. "Today's report brings new and encouraging evidence that inflation is falling while our economy remains strong.
"Real wages for the average American worker are now higher than they were before the pandemic, with lower wage workers seeing the largest gains," he added. "Our progress creating jobs while lowering costs for families is no accident."
FILE - A hiring sign is displayed at a restaurant in Mount Prospect, Illinois, July 6, 2023.
Bankrate.com economic analyst Mark Hamrick said, "The key readings of the Consumer Price Index turn out to be lower than expected across the board both on a month-over-month and year-over-year basis."
He predicted that "the Fed will almost certainly raise its benchmark rate in a couple of weeks because officials have said as much. It remains to be seen whether they will feel compelled to raise rates further in September or beyond, but it is likely in doubt."
The three major U.S. indexes all advanced sharply in midday trading on news of the taming of inflation. The benchmark Dow Jones average of 30 blue chip stocks was up nearly a percentage point, while the broader S&P 500 index and the tech-heavy NASDAQ exchange moved even higher.