Inflation Cools Sharply in June, Good News for Consumers and the Fed

“Inflation that is almost double the Federal Reserve’s target is not a win for American wallets and budgets,” Representative Jason Smith, a Missouri Republican who chairs the House Ways and Means Committee, said in an emailed statement, referencing the core inflation rate.

Inflation does remain above the rate of increase that was normal before the 2020 pandemic, and it is still much faster than the Fed’s 2 percent goal. The Fed defines that target using a separate inflation measure, the Personal Consumption Expenditures index. That gauge is also slowing notably, and its June reading is scheduled for release on July 28.

Even if central bankers are taking the slowdown cautiously — cognizant that price increases have slowed and then accelerated again before — many commentators welcomed the fresh data point as the latest sign that the economy might be able to slow gently.

Officials at the Fed have been trying to engineer a “soft landing,” in which inflation slows gradually and without requiring a big jump in the unemployment rate. Jerome H. Powell, the Fed chair, has repeatedly said that there was a “narrow path” to achieving one: There are few if any historical examples of the Fed wrestling significant inflation lower without a downturn.

Challenges continue to loom. The economy has momentum and the job market is strong, which could give companies the wherewithal to keep increasing prices. The ongoing war in Ukraine could always intensify, pushing up commodity prices.

But there are also factors that could help out: China’s rebound has been weaker than expected, which means that fewer buyers are competing for goods in global markets. Consumers are buying fewer retail goods, and while spending on services is not plummeting, it has been gradually slowing down.

And as those trends combine with inflation that is easing more convincingly, the odds of a gentle cool-down may be improving.

“Powell’s saying is that ‘it’s a narrow path to a soft landing,’ said Michael Feroli, chief U.S. economist at J.P. Morgan. “It’s looking maybe a little wider now.”

Alan Rappeport, Joe Rennison and Lydia DePillis contributed reporting.