Inflation in the U.S. has cooled off significantly. Great. Here’s what’s not so great.

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The inflation dragon is breathing a lot less fire, but it’s far from dead. The rate of inflation slowed sharply to 3% in June from a 40-year high of 9.1% a year earlier, the consumer price index showed. Wholesale prices have come down even more with the producer price index now essentially flat over the past year.

That good news this week on inflation cheered Wall Street investors. Stocks rose on Thursday for the fourth day in a row.

“ ‘It’s much easier to go from 9% to 4% inflation than from 4% to 2%.’ ”

— Richard Moody, Nations Financial

Many economists predicted the Federal Reserve is “one and done,” meaning it will raise interest rates just one more time, in July, and call it quits. The fight against inflation is not over by a long shot, however. Other measures of prices seen as better predictors of future trends show inflation stuck in the 4% to 5% range, well above the Fed’s long-run goal of 2%. The yearly increase in so-called core consumer prices — encompassing everything except food and energy — registered 4.8% in June. And the core PCE inflation rate, the Fed’s preferred gauge, stood at 4.6% at its last reading.

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