Declining inflation rates.
(Photo: Corbis Historical/Getty Images)
New York, Dusseldorf The inflation rate in the USA fell again significantly in June. Consumer prices in the world’s largest economy rose by 3.0 percent compared to the previous year. This was announced by the Ministry of Labor on Wednesday afternoon.
The rate was last this low more than two years ago. Economists had previously expected 3.1 percent. In May, the inflation rate was 4.0 percent.
Core inflation has also fallen for the third month in a row. The rate fell to 4.8 percent, which is the first time since the end of 2021 that it has fallen below five percent.
Core inflation is adjusted for volatile commodities such as energy and food and is therefore a widely used indicator of medium-term price trends. The main price drivers were again the cost of living, which accounted for more than 70 percent of the increase.
US inflation has weakened significantly in recent months. Nevertheless, it is considered likely that the Fed will raise interest rates again at its next meeting on July 26th.
Investors are already looking to the next but one meeting at the end of September. Stockbrokers should hope that the Fed “only turns the interest rate screw once more”, said the capital market expert Thomas Altmann from QC Partners.
At their last meeting, the monetary watchdogs had refrained from an increase – but signaled that further increases would follow in the course of the year. This caused great uncertainty on the markets, although the Fed hardly changed its communication. The key interest rate is currently in a range between 5.0 and 5.25 percent.
The markets were enthusiastic about the new data. According to over-the-counter indicators, the market-wide stock index S&P 500 and the Dow Jones should open in positive territory.
Bond yields continued to trade with daily losses after the publication of the new data. The return on two-year bonds – these react comparatively strongly to adjustments in the expected interest rate level – was 4.845 percent. In the past few days, it has moved slightly away from the five percent mark that it exceeded last week.
The dollar is also showing weakness. The dollar index, which compares the value of the world’s leading currency with other major currencies, has fallen to its lowest level in two months. The prospect of an end to the rate hike cycle is weighing on the currency.
More: The US Federal Reserve is signaling further rate hikes throughout the year