US consumer prices fell 0.1% in June from May. (Source: AP)

New data showed that U.S. consumer prices fell 0.1% last month from May. Year-on-year, inflation fell to 3% in June from 3.3% in May.

The slowdown in inflation has investors speculating more about when the Federal Reserve might start cutting interest rates. Wall Street’s odds of a September rate cut have risen from 73% to around 93%, according to the CME FedWatch tool.

A Fed rate cut in September seems a pretty solid scenario at this point, said Ron Temple, a strategist at financial services firm Lazard.

June inflation data, coupled with a cooling labor market, are encouraging signs that the Fed may be able to fulfill its dual mandate and begin easing interest rates in September.

The US economy added 206,000 jobs in June, and the unemployment rate hit 4% for the first time since November 2021. New claims for unemployment benefits have also risen in recent weeks.

Fed Chairman Jerome Powell gave no hints about when the US central bank might start cutting interest rates in testimony before Congress earlier this week, but he acknowledged that inflation has been moderate and the labor market is “strong but not overheating.”