The Consumer Price Index (CPI) report for June showed inflation improving faster than expected. While headline inflation accelerated slightly to 0.2% month-over-month, the year- over-year rate declined markedly to 3.0%, down from 4.0% in May. Core inflation, which has been proving sticky in recent months, increased only 0.2% month-over-month, marking its slowest monthly rate since August 2021. On a year-over-year basis, core inflation declined to 4.8% from 5.3% in May.
Despite a significant move in the right direction, inflation remains well above the Federal Reserve’s (Fed’s) target level, and today’s print is unlikely to convince the Fed that their tightening cycle is complete. Our long-held forecast is for only one additional 25 basis point rate hike this year, taking the peak policy rate to 5.25%-5.50% by year end.
Consumer Price Index
Year-over-year % change, 2010–present