CPI cools, but inflation isn't gone: The story behind the headlines

The latest Consumer Price Index (CPI) report for June sparked optimism across financial markets, with inflation coming in significantly cooler than expected. Headlines quickly celebrated what appeared to be another victory in the Federal Reserve's battle against inflation.

But according to Money Metals Midweek Memo host Mike Maharrey, the CPI tells only part of the story.

Drawing on broadcaster Paul Harvey's famous phrase, Maharrey argued that investors need to understand "the rest of the story"—one that includes runaway federal spending, continued money supply expansion, and shifting global demand for gold.

Deficits continue to explode

Before diving into inflation, Maharrey highlighted another troubling trend: America's rapidly growing fiscal imbalance.

The June Treasury Statement showed the federal budget deficit growing by another $120 billion, bringing the fiscal year 2026 deficit to nearly $1.37 trillion—even with three months remaining in the government's fiscal year.

Maharrey pointed out that trillion-dollar deficits were once considered extraordinary, occurring during the Great Recession under the Obama administration. Today's deficits, however, are occurring despite what many characterize as a strong economy.

Federal spending continues climbing. The Trump administration spent approximately $616 billion in June alone, roughly 23% more than during the same month last year. Maharrey argued the United States does not suffer from a revenue problem, but rather a chronic spending problem that continues regardless of which party controls Washington.

He warned that America's growing "debt black hole" continues to distort the broader economy and will ultimately limit how long the Federal Reserve can maintain higher interest rates.

June CPI comes in better than expected

Financial markets reacted immediately to the inflation report.

Gold surged sharply after the Bureau of Labor Statistics released June CPI data, signaling that inflation had come in below expectations.

Overall consumer prices declined 0.4% during June, compared to expectations for only a 0.2% decline. It marked the largest monthly drop in prices since the COVID-19 economic shutdown in 2020.

Annual CPI fell to 3.5%, beating forecasts of 3.8% and dropping significantly from May's 4.2% reading.

Core CPI—which excludes food and energy—also surprised to the downside. Instead of rising 0.2% as economists expected, core prices were unchanged for the month. Annual core CPI declined to 2.6%, down from 2.9%.

The three-month annualized inflation rate now stands at just 2.8%, reinforcing the perception that inflationary pressures are easing.

Falling Energy Prices Drove the Improvement

Maharrey emphasized that much of the improvement stemmed from collapsing energy prices rather than broad-based disinflation.

The energy index fell 5.7% during June, while gasoline prices plunged 9.7%.

Apparel prices also declined by 0.6%, and service-sector prices were essentially flat. Food prices, however, continued rising, increasing 0.2% during the month.

While these figures created an encouraging headline, Maharrey cautioned that inflation remains well above the Federal Reserve's stated 2% target. He also argued that the government's CPI methodology understates actual inflation compared to older formulas used during the 1970s, suggesting today's inflation rate would appear substantially higher under previous calculations.

Inflation is more than rising prices

A central theme throughout the episode was Maharrey's distinction between consumer price inflation and monetary inflation.

Historically, economists defined inflation as an expansion of the money supply—not simply rising consumer prices.

By that measure, Maharrey argued inflation remains alive and well.

Federal Reserve M2 money supply increased from $21.83 trillion in May 2025 to $23.05 trillion in May 2026, representing a 5.6% annual increase.

That newly created money may eventually appear in consumer prices, asset prices, stocks, real estate, or other markets. Even if consumer price inflation temporarily moderates, Maharrey argued that monetary inflation continues building beneath the surface.

He warned that focusing solely on CPI ignores the root cause of inflation: continued expansion of money and credit.

The Fed may already be easing

Although Federal Reserve officials continue emphasizing their commitment to returning inflation to 2%, Maharrey argued that the central bank's actions tell a different story.

He noted that the Fed's balance sheet has quietly begun expanding again after increasing since December, suggesting the central bank is effectively conducting quantitative easing by purchasing U.S. Treasury securities.

Those purchases inject newly created money into the financial system while supporting Treasury markets and helping suppress interest rates.

Maharrey believes this reflects the difficult position facing policymakers.

The Federal Reserve wants to control inflation, but it must also manage an economy burdened by enormous debt and dependent on easy money. As a result, he believes officials will ultimately choose monetary easing over prolonged economic pain if conditions deteriorate.

Ironically, the latest favorable CPI report may provide policymakers with political cover to cut interest rates should economic weakness emerge later this year or in early 2027.

Gold fundamentals remain intact

Despite recent weakness in precious metals prices, Maharrey maintained a long-term bullish outlook.

He cited comments from Money Metals CEO Stefan Gleason, who recently noted that central banks continue accumulating gold despite short-term market pullbacks.

Recent data showed central banks adding more than 40 metric tons of gold to official reserves during May alone, continuing a multi-year trend of nations diversifying away from U.S. dollar holdings.

Maharrey argued that persistent currency debasement remains one of the strongest long-term drivers supporting both gold and silver ownership.

Asian investors continue buying Gold

The second half of the program examined a striking trend highlighted in the World Gold Council's first-half 2026 market report.

According to the data, nearly all of gold's gains this year have occurred during Asian trading hours.

Gold rose 12.9% during Asian trading sessions through the first six months of 2026. During North American trading hours, however, the metal fell approximately 15%. European trading produced a modest 1.3% decline.

The World Gold Council described Asia as the "engine of price support" for gold, noting that many pullbacks occur during U.S. trading hours while rebounds typically develop during Asian sessions.

Maharrey said the data confirms an observation he had made simply by watching daily price action: Asian investors consistently buy weakness while North American investors often sell into rallies.

Decades of trading data tell the same story

Maharrey also discussed research from precious metals analyst Ed Steer.

Steer's historical analysis examined hypothetical investments beginning in January 1970 using London's daily gold fixes.

An investor who bought gold each morning at 10:30 a.m. London Gold Fix, and sold at the afternoon fix every trading day for 54 years, would have turned an initial $100 investment into just $6.97.

By contrast, buying at the afternoon fix and selling the following morning—effectively capturing overnight and Asian trading—would have grown that same $100 investment into approximately $112,274 by November 1, 2024.

Steer argues that this long-running pattern suggests large Western financial institutions actively influence gold prices during Western trading hours. Maharrey acknowledged the possibility of short-term price manipulation but said differences in regional demand likely explain much of the divergence.

Gold's center of gravity continues moving east

Maharrey argued that the global gold market increasingly revolves around Asia.

Chinese buying helped push global bar and coin demand above 1,374 metric tons last year, with worldwide retail demand reaching a record $154 billion. More than half of global bar and coin purchases came from China and India alone.

He also pointed to Hong Kong's recently launched gold settlement infrastructure, designed to compete with London's pricing dominance by establishing a new regional benchmark.

As Asian markets place greater emphasis on physical bullion rather than paper contracts, Maharrey believes global price discovery may gradually shift eastward, potentially reducing Western influence over precious metals pricing.

He also noted the cultural differences surrounding gold ownership, citing a 2018 survey showing that 87% of Indian households own gold, including more than 75% of families in the country's lowest income decile.

According to Maharrey, that long-standing appreciation for gold as money contrasts sharply with attitudes in the United States.

The bottom line

Maharrey concluded that investors should resist celebrating inflation's apparent defeat.

While lower gasoline prices have improved recent CPI readings, continued money supply growth, persistent federal deficits, and ongoing Federal Reserve intervention suggest inflationary pressures remain embedded in the financial system.

At the same time, central banks continue accumulating gold, Asian investors continue buying on price dips, and the long-term fundamentals supporting precious metals remain intact.

For investors concerned about the continued erosion of purchasing power, Maharrey argued that periods of price weakness in gold and silver should be viewed not as reasons to panic, but as opportunities to accumulate sound money.