Bonds & Rates
Home›Bonds & Rates›Inflation›US CPI cools in June as energy-driven drop offsets she…
US CPI cools in June as energy-driven drop offsets shelter gains
Headline CPI fell -0.4% month over month, while core prices were flat, leaving annual core inflation at 2.6% and shifting focus to upcoming Fed testimony.
US consumer prices slowed in June by more than expected, with the report showing headline inflation easing and core inflation failing to reaccelerate, according to Action Forex. Headline CPI declined -0.4% month over month, after rising 0.5% in May, and the annual rate cooled to 3.5% from 4.2% year over year.
Core CPI was unchanged on the month, bringing the annual core rate down to 2.6% from 2.9% year over year. Both headline and core inflation undershot market expectations, suggesting the recent inflation increase may have been more concentrated in energy than markets feared.
The energy index was the main driver of the improvement, falling -5.7% month over month after three consecutive prior monthly gains. Action Forex said that decline more than offset continued increases in shelter and food, with shelter up only 0.1% month over month, the smallest rise since January 2021, and food rising 0.2%.
With energy prices still 15.7% higher than a year earlier, the broader implication from the report is that underlying inflation pressures were continuing to moderate as the temporary energy shock unwinds. Investors will now focus on Fed Chair Kevin Warsh’s congressional testimony for clues on whether policymakers will treat the softer inflation data as enough to temper recent rate-hike expectations or emphasize fresh inflation risks from renewed oil-price strength.