Inflation Comes In Weaker Than Expected

US inflation cooled last month as the cost of gas, clothes, and used cars fell, providing some relief to consumers—though much of the progress could be reversed if the renewed Iran war keeps pushing oil prices up.

• Prices dropped 0.4% in June from May, the largest monthly drop in four years, the Labor Department said Tuesday. On a yearly basis, inflation declined to 3.5%, down from a year-over-year gain of 4.2% in May and lower than many economists expected, per the AP. Analysts polled by the Wall Street Journal predicted 3.8%.

• Excluding the food and energy categories, core prices were unchanged in June, a positive sign that underlying inflation is cooling. On a yearly basis, core prices rose 2.6%, down from 2.9% the previous month. Core inflation remains above the Fed's target of 2%.
• The inflation-fighters at the Fed remain sharply divided over next steps, according to the minutes of their June 16-17 meeting. About half of policymakers support raising interest rates by the end of the year to cool borrowing, spending, and price increases, the minutes showed. Another half are willing to wait for signs that inflation may resume falling as gas prices decline, though the minutes predate the recent flare-up of violence in the Middle East.
• On Tuesday, S&P 500 futures rose modestly after the report came out, notes CNBC, suggesting investors think a rate cut is more likely.