June CPI: Warm but not hot start to summer
|Summary
Consumer price inflation picked up in June, rising by 0.3% since May and 2.7% compared to one year ago. The faster price growth was largely anticipated by forecasters, as both the headline and core CPI increases were very close to our projections and the market consensus. Core goods prices rose 0.2% in the month, hinting at greater price pressures from the increase in tariffs on U.S. imports. Yet, core services inflation remained relatively tame, registering a 0.25% increase in June.
In the 12 months ending in June, core consumer prices have risen 2.9%. For the optimists, this represents a modest decline in core inflation from the 3.2% rate registered at the end of 2024. For the pessimists, the core inflation rate has been stuck around current levels since February and is still above the central bank's 2% inflation target. With the impact from tariffs still in the early innings, we expect the FOMC to maintain its wait-and-see approach to the fed funds rate at its upcoming meeting on July 29-30.
However, we still expect the FOMC to begin cutting rates at its September meeting. The gradual softening in the labor market that is ongoing suggests monetary policy is still restrictive, and if tariffs remain near current levels (admittedly a major "if" in today's policy environment), then we think the worst-case scenarios around the inflation outlook are increasingly unlikely.
Information on these pages contains forward-looking statements that involve risks and uncertainties. Markets and instruments profiled on this page are for informational purposes only and should not in any way come across as a recommendation to buy or sell in these assets. You should do your own thorough research before making any investment decisions. FXStreet does not in any way guarantee that this information is free from mistakes, errors, or material misstatements. It also does not guarantee that this information is of a timely nature. Investing in Open Markets involves a great deal of risk, including the loss of all or a portion of your investment, as well as emotional distress. All risks, losses and costs associated with investing, including total loss of principal, are your responsibility. The views and opinions expressed in this article are those of the authors and do not necessarily reflect the official policy or position of FXStreet nor its advertisers.