JUANA SUMMERS, HOST:
Well, here's something that hasn't happened in more than four years - the cost of living went down last month. Gasoline, cars and airline tickets all got cheaper in June than they were the month before. That was more than enough to offset a modest monthly jump in rent. NPR's Scott Horsley is here in studio to talk about what this means for inflation. Hello, Scott.
SCOTT HORSLEY, BYLINE: Hi, Juana.
SUMMERS: So Scott, I mean, we have been on this escalator for a whole lot of time now, where it just seems like prices keep going up. So tell us - what happened in June?
HORSLEY: Yeah, the escalator backtracked just a little bit. The Consumer Price Index, which measures the cost of living every month, fell by a tenth of a percent between May and June. Some of that, as you mentioned, with thanks to falling gas prices, which may not stick. In fact, gas prices have already rebounded a little bit this month. But we also saw a significant slowdown in rent increases in June, so that's good news. Mary Daly, who heads the Federal Reserve Bank of San Francisco, says it looks like inflation is moving in the right direction.
MARY DALY: First and foremost, it's a relief to Americans who are out trying to run businesses or purchase things that just the price inflation is falling.
HORSLEY: If you step back and look at the last 12 months, prices are up just 3%. Compare that to average wages, which are up nearly 4% over that period, and it's clear workers are making some real headway now in terms of how far their paychecks will go.
SUMMERS: And Scott, Mary Daly and her colleagues at the Federal Reserve have been battling inflation with higher interest rates. So do you think we're at a point yet where those rates can start coming on down?
HORSLEY: We are getting close. You know, Fed officials have been saying for a while now that, before they start cutting interest rates, they want to see more good data that inflation is falling. Today's report certainly counts as more good data that inflation is falling. Daly says, while there's still some uncertainty out there, she thinks signs are pointing in the direction of a rate cut in the not-too-distant future.
DALY: I see it as likely that some policy adjustments will be warranted.
HORSLEY: Now, Daly would not say exactly when that might happen. She left the door open at least a crack to cutting rates at the very next Fed meeting later this month, but most investors are betting it's going to be September before rates start coming down. Of course, lower borrowing costs would be welcome for anyone who wants to buy a house or get a car loan or who's carrying a balance on their credit card.
SUMMERS: Scott, on yesterday's show, we talked about grocery prices as a source of frustration for many shoppers, including this shopper. What does today's report tell us about that?
HORSLEY: Yeah, there is some more good news on the grocery front. Overall prices at the supermarket have risen just 1.1% over the last year - so pretty modest. Grocery shoppers are still feeling some pressure, though, and one place you see that is in the snack aisle. Pepsi said today that sales of its Frito-Lay snacks are down half a percent in the most recent quarter as customers become more value-conscious.
Sally Lyons Wyatt, who's with the big market research firm Circana, says some shoppers are switching to cheaper store brands, which is unusual when it comes to salty snacks. But it's not all about pinching pennies. Lyons Wyatt also says people are putting more upscale products in their shopping carts, maybe as kind of an affordable luxury.
SALLY LYONS WYATT: They cut back on many areas, but they'll invest a buck or more into something premium because at least it's a little treat - but at least I can have something that I perceive to be better quality, better taste, better experience, and it's going to be amazing.
HORSLEY: So maybe you economize on the store-brand tortilla chips but then splurge on a jar of gourmet spaghetti sauce and a pint of Ben & Jerry's ice cream.
SUMMERS: Can never argue with ice cream. Thank you, Scott.
HORSLEY: You're welcome.
SUMMERS: That's NPR's Scott Horsley. Transcript provided by NPR, Copyright NPR.
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