Friday’s report is the latest sign that inflation in the United States is steadily cooling from its once-painful highs
A measure of consumer prices that is closely monitored by the Federal Reserve fell last month to its lowest level since March 2021, the latest sign that inflation in the United States is steadily cooling from its once-painful highs.
Still, a measure of “core” prices, which excludes volatile food and energy costs, remained elevated even though it also eased last month. Those still-high underlying inflation pressures are a key reason why the Fed raised its short-term interest rate Wednesday to a 22-year high. The Fed’s policy-makers consider core prices a better measure of where inflation might be headed.
The latest data underscores the unusual nature of the economy: A healthy job market is bolstering hiring, driving up wages and keeping unemployment near a half-century low. Yet inflation is weakening rather than rising, as it typically does when unemployment is low. That suggests that the Fed may be able to achieve a difficult “soft landing” for the economy, in which inflation falls toward the Fed’s 2 per cent target without triggering a deep recession.
At a news conference Wednesday, Chair Jerome Powell suggested that the Fed’s benchmark short-term rate, now at about 5.3 per cent, was high enough to restrain the overall economy and likely tame inflation over time. But Powell added that the Fed would need to see more evidence that inflation has been sustainably subdued before it would consider ending its rate hikes.
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