US inflation cools to slowest pace in a year

Price rises in the US cooled in June, building hopes that the world's largest economy is moving on from the bout of high inflation that hit after the pandemic.

Prices rose 3% over the 12 months to June, as lower energy prices helped to deliver the slowest price inflation in a year, the Labor Department said.

It marked the third month in a row that price inflation has fallen, easing financial pressures on households and potentially clearing the way for the US central bank to cut interest rates as soon as September.

The Federal Reserve's key lending rate has stood at more than 5.3%, a roughly two-decade high, since last year.

Fed officials say high borrowing costs are weighing on the economy, helping to reduce the pressures pushing up prices.

Analysts said the latest report could help to convince the bank that it has done enough to cure the problem.

From May to June, prices actually dropped 0.1% - the first outright monthly decline in years.

The progress is welcome news for the White House, which has struggled with widespread economic dissatisfaction as the jump in living costs and interest rates squeeze households.

Over the past year, energy prices and the cost of cars have fallen, but the cost of other staples has continued to rise.

Grocery prices are up 1.1% since June 2023, while housing costs have climbed 5.1%.

At hearings in Washington this week, Republican lawmakers warned Fed chairman Jerome Powell that a rate cut ahead of the November election would be perceived as trying to "gin up the economy" for the president.

Mr Powell refused to speculate about when the Fed would make its next move, but defended the bank's political independence and said its decision would be rooted in the data.

He told lawmakers a cut was the most likely next step, noting that the bank was alert, not just to inflation figures, but also to signs that the economy was slowing.

"We're very much aware that we have two-sided risks now and we're determined to balance those as best we can," he said. "We want to see more good inflation data and we also want to continue to see a strong labour market."

In June, the US unemployment rate crept above 4% for the first time in more than two years.