US inflation reached its lowest level since March 2021 in June.

Over just one month, consumer prices rose 0.2% against 0.1% in May, below analysts' expectations.

In a statement, U.S. President Joe Biden said the index is "encouraging evidence that prices are falling while our economy remains strong." "Unemployment remains at a record low," he added.

Also in a slowdown phase, core inflation, i.e. excluding food and energy prices, fell to 4.8% year-on-year, from 5.3% the previous month.

Here again, the pace observed over one month (+0.3%) is slightly lower than expected (+0.4%).

Food, which remains a major topic regarding the feeling of the rise in prices, remains at a fairly high level (+5.7% over one year) but prices have been generally stable in recent months (+0.1% in June).

Another area of concern is that house prices are also experiencing a higher than average pace (+7.8% over one year) and seem to remain one of the points of inflation (+0.4% over one month).

Inflation in the United States © Jonathan WALTER, Laurence SAUBADU / AFP

More broadly, "core inflation in services remains high but a little less than that observed in the last three months and mainly driven by house prices, but should also slow," according to Nationwide chief economist Kathy Bostjancic.

The Fed keeps an eye on indicators

This further slowdown in consumer prices has led to a 16-month weakening of the dollar against the euro, as currency traders believe that the current pace of inflation opens the possibility that the Fed will only raise rates at its next meeting in two weeks.

Wall Street also rejoiced and remained on the rise at midday.

Food, which remains a major topic regarding the feeling of rising prices, remains at a fairly high © level Frederic J. BROWN / AFP/Archives

Fed Chairman Jerome Powell has repeated several times in recent weeks that in the state of economic data at the time, several rate hikes were still planned, "at least two, possibly in a row," he said at a meeting of central bankers in Sintra (Portugal) at the end of June.

Another member of the Fed's monetary committee (FOMC), Austan Goolsbee, estimated on July 7 that "the consensus among almost all members is that, this year, we will have one or two more hikes. I don't see anything to contradict him."

However, the Fed has regularly stressed that its next hikes will be based on the analysis of macroeconomic data, and in particular the evolution of another inflation index, the PCE, which it favors.

"The Fed has already done a lot: the labor market is showing some signs of easing, inflation is slowing and we are still on the path of a soft landing but the margin is shrinking and it will be difficult for it to continue on this path," said Ryan Sweet, chief economist at Oxford Economics. interviewed by AFP.

In May, the PCE index had fallen to 3.8% but core inflation was still too high, especially in services, reinforcing the idea of a hike at the next Fed meeting.

"PCE core inflation remains well above the Fed's target. The economy remains solid and the not so high rates and especially the main hikes were made a while ago, so the Fed must do more, "said on Twitter Jason Furman, former chairman of the National Economic Council and professor at Harvard.

The latest, in mid-June, resulted in a first pause in the sequence of increases, after a dozen consecutive rate increases.

© 2023 AFP