US inflation falls below expectations to 3% in June
The US Federal Reserve
The 3% figure represents the smallest inflation reading since March 2021, with the US now coming close to the Federal Reserve's 2% target.
Core inflation, which excludes food and energy, came in at 4.8%, down from 5.3% the month before and below expectations of 5%.
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Shelter continued to be the biggest driver of inflation, contributing to over 70% of the increase throughout the month, while the cost of motor vehicle insurance also pushed prices up.
Meanwhile, airline fares contributed to the decline, falling 8.1% over the month, while communication, used cars and trucks, and household furnishings and operations also decreased.
Daniel Casali, chief investment strategist at Evelyn Partners, argued there were still reasons why inflation would continue to fall, such as strengthening supply chains and slowing rental inflation.
«Using data from timely online residential platforms, recent research from Goldman Sachs shows that average annualised rental inflation has eased to just 1% over the last eight months to June, from 20% plus in mid-2021,» he noted.
Casali also pointed to various lead indicators that suggested lower core inflation in the months ahead.
«Selling prices from the National Federation of Independent Business, or better known as the small business survey, have fallen to a level last seen when core CPI inflation was roughly 4%,» he said.
«The annual change in job openings is another lead indicator with a decent track record of leading inflation and this too points to lower pace of price gains ahead.»
Markets are still predicting one more hike from the Fed at its meeting on 26 July, giving a 91.1% chance of a 25bps hike, according to
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