US inflation saw another dramatic slowdown in June

• US inflation is still tumbling, per new data out Wednesday.
• The Consumer Price Index rose by 3.0% year over year in June, below the change in May.

June held more good news for Americans' wallets, as inflation yet again dramatically cooled.

That's based on new Consumer Price Index data from the Bureau of Labor Statistics on Wednesday, which is one measure of inflation. The Consumer Price Index, or CPI, rose by 3.0% in June from a year prior. That suggests another month of cooling inflation, after the unadjusted year-over-year change in May was 4.0%.

June's change was not too far off the year-over-year CPI forecast. Inflation was expected to continue to tumble, as it has been this whole year, with a forecast of 3.1%. Inflation, as measured by year-over-year changes in CPI, had been broadly rising since the second half of 2020 before peaking in June 2022 at 9.1%. However, the year-over-year CPI has tumbled every month since then, and the new data means 12 months of falling inflation.

"There have been a lot of ambiguous signals, and this is just clearly a good reading," Anne Villamil, a professor of economics at University of Iowa Tippie College of Business, told Insider.

Villamil added that given core and overall CPI is still high and greater than the Fed's goal, "the Fed is going to continue to be cautious, but it is very, very good news."

Julia Pollak, ZipRecruiter's chief economist, similarly praised the latest report.

"The sustained decline in inflation is encouraging news for the US labor market outlook," Pollak said in email commentary. "It increases the likelihood that the Fed will be able to pause rate hikes after one final July increase, and gradually lower rates through 2024, encouraging private sector investment to pick up again. It also increases the likelihood that US workers will finally receive real wage increases and see their purchasing power expand."

CPI ticked up from May to June by 0.2%, according to seasonally adjusted data. The month-over-month percent change was expected to be more than the percent change in May, from a month-over-month increase of 0.1% in May to a month-over-month increase of 0.3% in June.

The uptick in month-over-month CPI had contributed to real wages ticking up, according to a news release from the Bureau of Labor Statistics on Wednesday. Real average hourly earnings rose by 0.2% month over month in June.

Core CPI, which excludes food and energy, climbed by 4.8% from June 2022 to this past June, per unadjusted data. That's less than the forecasted increase of 5.0%, and less than the year-over-year growth in May, which was 5.3%.

Core CPI edged up by 0.2% from May to June per seasonally adjusted data, less than the forecast of 0.3% and the smallest month-over-month growth since August 2021. The latest month-over-month percent change was also below the 0.4% growth seen in each month from March to May.

The index for shelter continues to cool slightly but is still high, with a year-over-year increase of 7.8% in June. According to seasonally adjusted data, this index climbed by 0.4% from May to June, below the 0.6% gain from April to May.

"That wasn't a surprise," Villamil said about the index for shelter moderating, "because if you think about something like rent, people sign year-long contracts, and we've been expecting it to come down, but we can now see it coming down. So that's important, and the expectation is that that would fall further."

"The index for shelter was the largest contributor to the monthly all items increase, accounting for over 70 percent of the increase," the news release from BLS about the latest CPI data stated.

The index for food overall soared by 5.7% from the same time a year ago in June. The index for energy saw a massive drop year over year, falling by 16.7%. Specifically, fuel oil plunged by 36.6% year over year.

While inflation is still falling in the US, it's still more than the Fed's 2% target, at least by the overall year-over-year CPI measure. The Federal Reserve didn't raise interest rates in June after 10 straight hikes, and the next Federal Open Market Committee meeting is in two weeks.

"My colleagues and I understand the hardship that high inflation is causing, and we remain strongly committed to bringing inflation back down to our 2% goal," Federal Reserve Chair Jerome Powell said in June for the Semiannual Monetary Policy Report to the Congress. "Price stability is the responsibility of the Federal Reserve, and without it, the economy does not work for anyone. In particular, without price stability, we will not achieve a sustained period of strong labor market conditions that benefit all."

Villamil noted that with real GDP in the first quarter of 2023 increasing by a 2.0% annualized rate, a cooling yet still-positive labor market, along with a strong inflation reading, these are all robust numbers — and they are ideal for the Fed.

"All of those numbers are moving in the right direction, and that is very good news," Villamil said.