Optimism is growing among economists, investors and Federal Reserve officials that inflation in the United States is almost under control, with the latest consumer price report expected to show another month of slight increases.

WASHINGTON: There is growing optimism among economists, investors and Federal Reserve officials that inflation in the US is almost under control. The latest consumer price report is expected to show another month of slight increases.

Consumer prices in the United States are likely to have risen by just 0.1 percent from May to June, according to a survey of economists by data provider FactSet. The data, which the government will release on Thursday morning, is based on these figures.

Inflation in June was likely dampened by lower gasoline prices and a slight increase in food costs. The slight increase follows an unchanged reading in the previous month. Year-on-year inflation is expected to be 3.1% in June, up from 3.3% in May.

Chairman Jerome Powell and his colleagues at the Fed remain cautious. On Wednesday, Powell reiterated that there had been “significant progress” in moderating inflation to the central bank's 2 percent target, but warned that “more good data” was needed for Fed officials to gain the confidence they need to lower their benchmark interest rate, which is currently at a two-decade high of 5.3 percent.

And although inflation is easing overall, essential goods like food, rent and health care are much more expensive than they were three years ago – a lingering source of popular discontent and a potential threat to President Joe Biden's re-election chances. Most other indicators suggest the economy is healthy, even if it is slowing: Unemployment is still relatively low, hiring remains stable and many consumers continue to travel, eat out and spend money on entertainment. But polls have shown that cumulative price increases are weighing on Biden's popularity.

The Fed has left its benchmark interest rate unchanged for nearly a year after raising it aggressively in 2022 and 2023 to combat the worst wave of inflation in four decades. The rate hikes have made mortgages, auto loans, credit cards and other forms of borrowing more expensive for consumers and businesses. Inflation is now well below its peak of 9.1% in mid-2022.

If June's inflation data is in line with economists' collective forecast, it would almost certainly be another piece of the “more good data” Powell is looking for. Excluding volatile food and energy costs, so-called core prices are expected to have risen just 0.2% from May to June – the same as the previous month – and 3.4% year-on-year. That would be a sharp decline from June 2023, when core inflation rose 4.8% over the previous 12 months.

Fed officials and economists pay particular attention to core prices, which are believed to be a better indication of where inflation is likely to head. A rise in core prices of about 0.2% per month or less is generally in line with the Fed's inflation target.

Core inflation cooled steadily in the second half of 2023, raising expectations that the Fed would cut its benchmark interest rate as many as six times this year. But then rapidly rising costs for auto insurance, home rents and other services kept inflation high in the first three months of this year, prompting Fed officials to cut their forecasts for rate cuts in 2024 from three to just one. Wall Street traders expect two rate cuts this year and have put the probability of a first cut in September at about 75%, according to futures prices tracked by CME FedWatch.

Some of consumers' biggest financial worries – the cost of groceries and gasoline – likely eased last month, helping to keep inflation under control. Nationally, average gasoline prices fell about 18 cents a gallon to $3.42 in mid-June, according to the Energy Information Administration. (They've risen about 6 cents since then.)

Grocery prices are estimated to have risen 0.2 percent last month, up just 1 percent from a year ago. Yet they have risen more than 20 percent over the past three years, putting a strain on many Americans' budgets.

In his testimony before Congress on Tuesday, Powell noted that the labor market had “cooled significantly” and was “not a source of broad inflationary pressures.” This was a sharp departure from his previous comments in which he had suggested that rapid wage growth could perpetuate inflation because some companies would likely raise prices to offset higher labor costs.

Instead, last week's June jobs report showed that despite continued strong hiring, the unemployment rate rose for the third straight month to a still-low 4.1%. More Americans have started looking for work, but some are struggling to find a job. Most of the new hiring in the economy in recent months has come in just three sectors: government, health care and a category that includes restaurants, hotels and entertainment companies.

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