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Gasoline-driven drop in June CPI may not shift Fed outlook
June CPI is expected to fall 0.2% on the month, but core inflation is forecast to stay near 2.8% annually, with services inflation still running around 3.4%.
Ahead of the June CPI release, Forexlive says any likely improvement in the headline inflation rate is expected to be driven largely by cheaper gasoline rather than a broad-based cooling in prices, making the core reading more important for markets and the Fed's next steps.
Forexlive points to forecasts for a 0.2% month-over-month decline in consumer prices and a pullback in the annual headline rate to 3.8% from 4.2% in May, supported by an estimated 15% drop in regular gasoline prices between mid-May and the end of June.
The wire service adds that the underlying picture looks stickier. Core CPI is expected to rise 0.2% in June and the annual core rate is seen slipping only to 2.8% from 2.9% in May, with services inflation accelerating to about a 3.4% annual pace.
Forexlive also flags that services inflation, which includes items such as rent, dining out, and recreation, has been the tougher part of the inflation problem, and it notes energy conditions remain volatile after oil prices rose to around 75 dollars a barrel as a Middle East ceasefire broke down.
Latest closeGasoline (RBOB) $2.974 ▼0.4%