Jerome Powell and his colleagues had reason to celebrate on Thursday.

US inflation came in below estimates in crucial government data covering June. It was the third benign read on CPI in a row and, more importantly, the second consecutive downside surprise.

The core gauge rose just 0.1% in June from the prior month, the BLS said. The unrounded print was 0.065%, the lowest since January of 2021. Consensus expected 0.2%.

On a YoY basis, core inflation ran 3.3% in June, still nowhere near target, but good enough to start the rate cut conversation in earnest. Remember: The point is to preempt a recession, not wait around for one. This month marks a year at terminal for the Fed.

The headline CPI gauge actually showed a MoM decline, falling -0.056%. It was only the second decline since May of 2020. The 12-month reading there was 2.97%.

Notably, the shelter gauge rose just 0.2% in June from May (0.17% unrounded). That’s good news. As the figure below shows, June’s print was the most favorable in a very, very long time.

The shelter component’s the bane of the Fed’s existence. Month after month, measures of housing inflation defied policymakers’ expectations of a meaningful slowdown. Maybe that slowdown’s finally here. If it is, it’s a confidence builder for the Fed.

Another big drop for the gas gauge more than offset the increase in the shelter component for the purposes of the all-items index.

Electricity prices fell 0.7% MoM. The food at home gauge rose a tolerable 0.1%, marking the fifth straight month of benign (or no) price growth for groceries. On a YoY basis, the food at home index rose 1.1%.

Elsewhere in the release, both new and used vehicle prices fell from the prior month, apparel prices posted only the smallest of monthly gains and transportation services prices fell a second month.

Both of the CPI-derived “supercore” measures were benign. Core services ex-shelter printed 0.07%, while core services ex-OER and rent slipped -0.05%, the second straight monthly drop.

This is over. Knock on wood. But this is over. Maybe not in the long-term, or even in the medium-term, but almost surely in the near-term. Put another way: Inflation’s likely to be more volatile and structurally higher in the post-pandemic era, but for the purposes of this cycle and the near-term outlook for Fed policy, it’s over.

Powell this week told US lawmakers the Fed’s seen “modest” progress on the disinflation front over the last few months after a harrowing start to the year. Still, he said, officials wanted more evidence. Thursday’s release is that evidence.

Barring a dramatic re-acceleration in price growth between now and September, the Fed will cut at that month’s meeting. I’d expect Powell to start laying the groundwork for a September move in his press conference remarks later this month.