The US inflation eased as per the latest data reported for June 24, the number is progressively getting closer to the Fed’s long-term target of 2.00%. The CPI-based Headline Inflation declined to 3.00% in June 24, as against the previous month’s 3.30%, on a y-o-y basis.
The price of Gasoline continued to ease by -2.50% y-o-y basis and -3.80% m-o-m from its previous month’s fall of -3.60%. The Energy Commodities decreased by -2.20% y-o-y and -3.70% m-o-m while, Energy Services show a significant increase of 4.30% on a y-o-y basis, keeping the overall Energy Index elevated at 1.00% y-o-y. The index for Food rose by 2.20% annually, whereas Food at Home increased by 1.10%, while Food Away from Home increased by 4.10% y-o-y in June’24.
Core Inflation – The Core Inflation (excluding Food and Energy) was at 3.30% during the month of June’24, compared to the previous month’s number of 3.40% on a y-o-y basis, the lowest in the last 11 months. The Shelter Index on m-o-m basis rose by 0.20% at a declining rate, after its 4 time consecutive increase in previous months. For the 12 months ended June 2024, Transportation Services, Shelter Index, Medical Care Services, Medical Care Commodities and Apparel increased by 9.40%, 5.20%, 3.30%, 3.10% and 0.80% respectively, while Used Cars and New Vehicles decreased by -10.10% and -0.90% respectively.
Outlook – The June’24 numbers where Core Inflation is at 11 months’ lowest, the Headline Inflation is the lowest for the 4th time consecutively, signalling progress in attaining the Fed’s long-term goal of 2.00% inflation. During the month, the unemployment numbers marked a significant change where the unemployment rate is at 4.10% and unemployed people are at 6.80 million which is quite higher than a year earlier when the unemployment rate was just 3.60% and unemployed people were at 6.00 million. This data could provoke the Fed for an early rethinking on the interest rate policy. Basis current data, the Fed is likely to give its first interest rate cut of 2024 somewhere in Sept – Oct 24, much earlier than the market anticipates, a view which we have held on to over the last three months.
