Underlying US inflation cooled in June to the slowest pace since 2021 on the back of a long-awaited slowdown in housing costs, sending the strongest signal yet that the Federal Reserve can soon cut interest rates.

After the consumer price index report, Treasuries rallied and traders all but fully priced in September and December rate cuts. Policymakers will have a chance to signal such a move when they meet later in July, especially since the unemployment rate has now risen for three straight months.