US annual inflation rate slows despite higher oil prices

The annual US inflation rate, based on the Consumer Price Index (CPI), advanced 3.5% last month, according to data from the US Bureau of Labor Statistics (BLS).

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The year-on-year inflation data represents a decrease from the 4.2% growth seen in May.

Brent crude's price has remained elevated despite the soft inflation data, which comes amid renewed hostilities in the Middle East.

The slowdown in inflation reading has “removed the immediate threat” of an interest rate hike by the US Federal Reserve (Fed) in July, according to SPI Asset Management managing partner Stephen Innes.

Lower interest rates in the US can boost demand growth and make dollar-denominated commodities like oil less expensive for holders of other currencies.

“Markets got the inflation print they wanted,” Innes said. “Soft CPI has bought the Fed time,” he added.

On month-on month basis, the US inflation rate decreased by 0.4% in June, reversing course from the 0.5% growth noted in May.

The month-on-month data represents the third weaker inflation reading since the beginning of the Middle East conflict on 28 February.

Notably, the US central bank remains focused on bringing annual inflation down to its 2% target.

By Aparupa Mazumder

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