The Wall Street Journal reports that inflation cooled during June “to its slowest pace in more than two years, giving Americans relief from a painful period of rising prices but remaining strong enough to leave the Federal Reserve on course to keep raising interest rates.
“The consumer-price index climbed 3% in June from a year earlier, the Labor Department said Wednesday, sharply lower than the recent peak inflation rate of 9.1% in June 2022, when gasoline prices hit a U.S. record average of $5 a gallon.”
The Fed is said to be targeting an inflation rate of two percent.
Some context from the Journal:
“Fed officials are on track to raise rates to a 22-year high at their July 25-26 meeting because economic activity hasn’t slowed down as much as anticipated. But the inflation report calls into question whether the Fed will lift rates after that, as most officials projected last month … The U.S. economy remains resilient this year despite the Fed’s rate increases, defying predictions of an economic downturn. Hiring slowed in June but was still strong and unemployment historically low. U.S. economic output rose at a 2.3% annual rate during the recently ended second quarter, according to the Atlanta Fed’s most recent estimate.
“Fed officials have said that they don’t want to overreact to one positive monthly inflation reading and will want to make sure a meaningful trend is beginning. Whether inflation keeps declining will depend on the economy weakening and price pressures ebbing in the months ahead.”
KC’s View:
I’m no economist, but it does seem as if most of the signs are pointing toward a recession that is unlikely to occur. And, if it does occur, it’ll be brief and shallow. All good news, but it does not address the problem of a recessionary mindset, which persists in many quarters.
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