The chances of the US Federal Reserve slashing interest rates have brightened as June inflation cooled broadly in June. This has been attributed to a slowdown in housing costs.

The core consumer price index (CPI), which excludes food and energy costs, rose just 0.1 per cent from May, the smallest advance in three years, Bureau of Labor Statistics figures showed.

The overall measure fell for the first time since the onset of the pandemic, dragged down by cheaper gasoline.

The June reading will go a long way toward giving Fed Chair Jerome Powell and his colleagues the confidence they need to cut rates, likely starting in September, Bloomberg reported. “Policymakers will have a chance to signal such a move may be coming when they meet later in July, especially since unemployment has now risen for three straight months.”

It may be mentioned here that Powell, in testimony before lawmakers this week, avoided signaling the timing of likely rate cuts and insisted policy moves would be guided by incoming data. The Fed chief is set to speak again Monday afternoon in a moderated discussion hosted by the Economic Club of Washington, DC.

The report is also likely to be comforting President Joe Biden who is facing criticism on account of his cognitive issues.

“Probably the most significant aspect of the June report is the downshift in housing inflation,” said Julia Coronado, the founder of MacroPolicy Perspectives LLC and former Fed economist. “It looks broad-based and durable, and numerous Fed officials have indicated a downshift would boost their confidence that inflation is indeed returning to 2 per cent in a sustainable way.”