The annual inflation rate in the US is anticipated to fall for a third straight month to 3.1% in June 2024, the lowest rate since January. This follows a 3.3% rate in May, indicating that the disinflation process is underway after a brief uptick in the first quarter.

Monthly CPI Increase

Compared to the previous month, the Consumer Price Index (CPI) is projected to increase by 0.1%, following a flat reading in May. This slight increase suggests that while some price pressures remain, the overall inflation trend is downward.

Key Contributing Factors

Several factors are expected to contribute to the lower inflation rate:

Gasoline and used car prices likely fell, easing some of the cost pressures on consumers.

Shelter costs are expected to have moderated, contributing less to the overall inflation rate.

Food prices, on the other hand, probably ticked up, reflecting ongoing volatility in this category.

Core Inflation Steady

Core inflation, which excludes the more volatile food and energy prices, is projected to remain steady at 3.4%, matching the rate from May. This consistency in core inflation suggests that underlying inflationary pressures have stabilized. The monthly core inflation rate is anticipated to stay at 0.2%.

Economic Implications

The continued decline in the annual inflation rate indicates that disinflationary trends are taking hold in the US economy. This trend is crucial for policymakers, businesses, and consumers as it reflects the effectiveness of measures aimed at curbing inflation.

Federal Reserve's Outlook

The Federal Reserve is likely to monitor these developments closely, particularly the steady core inflation rate, as it considers future monetary policy decisions. Fed Chair Jerome Powell has emphasized the need for more data before making significant policy changes, and the June inflation report will be a key input into the Fed's deliberations.

Market Reactions

Financial markets are expected to react to the new inflation data, with potential implications for interest rates, stock prices, and the US dollar. Lower inflation could lead to expectations of more accommodative monetary policy, which can influence market sentiment.

In summary, the expected fall in the US annual inflation rate to 3.1% in June 2024 marks a significant milestone in the ongoing disinflation process. While gasoline and used car prices decline and shelter costs moderate, food prices remain a point of concern. The steady core inflation rate at 3.4% underscores the stabilization of underlying inflationary pressures, setting the stage for critical economic and policy decisions in the months ahead.

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