Prices fall for the first time since 2020

For the first time since the initial disruptions of the 2020 pandemic, the US headline consumer price index registered an outright month-on-month decline, falling 0.1 per cent in June. Core inflation advanced by a modest 0.16 per cent, dragging the annual core pace down to 3.3 per cent. Disinflation is finally broadening across the economy.

Broadening Disinflationary Momentum

What distinguished the June print was the decisive cooling in long-troublesome shelter categories, alongside outright deflation in used vehicles, airline fares, and consumer electronics. The broad-based softening demonstrates that restrictive monetary policy is finally biting into consumer pricing power. With price growth cooling across multiple categories, the path is cleared for the Fed to initiate interest rate cuts.

An outright contraction in monthly consumer prices confirms that disinflation has broadened beyond energy, providing the Federal Reserve with the empirical mandate to begin easing.