After two years of painfully high prices, inflation in the United States has reached its lowest point in more than two years — 3% in June compared with 12 months earlier — a sign that the Federal Reserve’s interest rate hikes have steadily slowed price increases across the economy.
The inflation figure the government reported Wednesday was down sharply from a 4% annual rate in May, though still above the Fed’s 2% target rate. Over the past 12 months, gas prices have dropped, grocery costs have risen more slowly and used cars have become less expensive. From May to June, overall prices rose 0.2%, up from just 0.1% in the previous month but still comparatively mild.
At the same time, some underlying inflation pressures remain high and a nagging concern for the Fed, which is all but certain to increase its key interest rate again when it meets in two weeks. The Fed has raised its benchmark rate by a substantial 5 percentage points since March 2022, the steepest pace of increases in four decades. Its expected hike this month will follow the central bank’s decision to pause its rate increases last month after 10 consecutive hikes.
