By CHRISTOPHER RUGABER | AP Economics Writer
WASHINGTON — Squeezed by painfully high prices for two years, America’s households have gained some much-needed relief with inflation reaching its lowest point since early 2021 — 3% in June compared with a year earlier — thanks in part to easing prices for gasoline, airline fares, used cars and groceries.
The inflation figure the government reported Wednesday was down sharply from a 4% annual rate in May, though still above the Federal Reserve’s 2% target. From May to June, overall prices rose 0.2%, up from just 0.1% in the previous month but still comparatively mild.
Even with Wednesday’s better-than-expected inflation data, the Fed is considered all but sure to boost its benchmark rate when it meets in two weeks. But with price increases slowing — or even falling outright — across a broad range of goods and services, many economists say they think the central bank could hold off on what had been expected to be another rate hike in September, should inflation continue to cool.
“It takes the second hike off the table, if that trend continues,” said Laura Rosner-Warburton, senior economist at MacroPolicy Perspectives. “They’re probably on hold for the rest of the year.”
On Wall Street, investors cheered the encouraging inflation news, sending stock and bond prices sharply higher. The broad S&P 500 index rose 1% in midmorning trading.
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.
Over the past two months, inflation has slowed rapidly — from nearly 5% in April to just 3% now. Much of that progress reflects the fading of big spikes in food and energy prices that followed Russia’s invasion of Ukraine last spring.
Other major drivers of higher prices,…
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