Airfare Prices Are Dropping as Inflation Cools, According to the June Inflation Report. Will Rent Prices Be Next?

Inflation remains high, but there could be signs of cooling, according to the just-released June Inflation Report.

Inflation rose at the slowest rate in two years in June, a small win for the economy and the Fed, which has been working to tame inflation for nearly 16 months.

The consumer price index (CPI), which measures the average change in prices experienced by consumers, rose 0.2% in June, after increasing 0.1% in May. While the CPI is up 3% over the last 12 months, June’s inflation report marks the smallest monthly increase since August 2021, signaling that inflation is showing signs of finally cooling. Still, it may be too early for the Fed to declare victory.

“This is very promising news,” Laura Rosner-Warburton, senior economist and founding partner at MacroPolicy Perspectives, told The New York Times. “The pieces of the puzzle are starting to come together. But it’s just one report, and the Fed has been burned by inflation before.”

Among the key products and services that declined were airfare, gas, and used vehicles. Meanwhile, rent prices have continued to rise.

How rent prices affect inflation

Rent prices are still rising, but at a slower pace than they were a few months ago — which is good news for tenants, who are finally seeing some relief after months of steep increases. The Labor Department reported that rents rose 0.5% last month, the slowest rate of increase since late last year.

Rent is the largest component of the CPI (accounting for over 70% of the monthly increase), so a slowdown in rent increases would help to bring down overall inflation. However, housing costs are still rising faster than overall consumer prices.

How much has airfare dropped?

Airfare prices dropped 8.1% in June, following declines in both April and May. The drop follows a confluence of factors that hiked up prices over the past year, including pent-up demand, a shortage of seats, and rising fuel prices. However, as the demand for flights has eased and supply has increased, airfares have begun to drop.

Overall, the report says there are some signs that inflation is cooling in some areas while prices are still rising in others, and it’s unclear how long the slowdown will last.