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Inflation: Consumer prices in June rose at slowest annual rate since March 2021

Consumer prices rose at the slowest pace since March 2021 as inflation showed further signs of cooling in June, according to the latest data from the Bureau of Labor Statistics released Wednesday morning.

The Consumer Price Index (CPI) rose 0.2% over last month and 3% over the prior year in June, a slight acceleration from May's 0.1% month-over-month increase but a slowdown compared to the month's 4% annual gain.

Both measures were slightly better than economist forecasts of a 0.3% month-over-month increase and a 3.1% annual increase, according to data from Bloomberg.

On a "core" basis, which strips out the more volatile costs of food and gas, prices in June climbed 0.2% over the prior month and 4.8% over last year. Both measures were also slightly better than economist expectations.

The monthly core increase was the smallest 1-month increase in that index since August 2021.

This content is not available due to your privacy preferences.Update your settings here to see it.Core inflation remained especially sticky last month as rent prices continue to surge. The index for rent and owners' equivalent rent rose 0.5% and 0.4%, respectively, on a seasonally adjusted basis. Owners' equivalent rent is the hypothetical rent a homeowner would pay.

The shelter index, which jumped 7.8% annually and 0.4% between May and June on a seasonally adjusted basis, was the largest factor in the monthly increase of core inflation.

Among the other indexes that rose in June was the index for motor vehicle insurance, which increased 1.7%, and the index for apparel which increased 0.3%. The indexes for recreation and personal care also increased last month, the BLS noted.

Still, other indexes did see prices soften such as airline fares, which fell 8.1%, along with the prices for used car, which had been expected.

The energy index decreased 16.7% for the 12 months ending in June although prices increased 0.6% on a seasonally adjusted, month-over-month basis after falling 3.6% in May's report.

The food index increased 5.7% over the last year with food prices rising 0.1% from May to June. Egg prices fell another 7.9% last month after dropping 13.8% in May and 1.5% in April.

US stocks moved higher in early trading following the release of the data. Treasury yields fell about 8 basis points to around 3.9%.

The Fed, chaired by Jerome Powell, is widely expected to hike interest rates later this month (AP Photo/Andrew Harnik, File)Although the 3% jump in headline inflation represents a continued slowdown, it's still significantly above the Federal Reserve's 2% target.

That, along with last week's jobs report data that showed a resilient labor market with unemployment low and wages high, suggests the Federal Reserve will continue to raise interest rates this year.

Cleveland Fed President Loretta Mester and San Francisco Fed President Mary Daly both signaled on Monday more rate hikes were needed to tame inflation.

Investors will be closely monitoring comments from central bank officials including Minneapolis Fed President Neel Kashkari, Atlanta Fed President Raphael Bostic, Richmond Fed President Tom Barkin, and Cleveland Fed President Loretta Mester, who are all expected to speak on US economic policy throughout Wednesday.

The central bank paused its aggressive rate hiking cycle in June but implied it will likely raise rates by 0.25% two more times this year (or raise rates by 0.50% in one shot).

Immediately following the release of the data, markets were pricing in a roughly 90% chance the Federal Reserve raises rates by another 0.25% at its July 26 policy meeting, according to data from the CME Group.

Alexandra is a Senior Reporter at Yahoo Finance. Follow her on Twitter @alliecanal8193 and email her at here for the latest stock market news and in-depth analysis, including events that move stocks

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