Energy and shelter were the biggest drivers of last month’s inflation.
U.S. inflation registered its largest increase in five months in June and provided little indication whether tariffs were triggering price pressures.
The shelter index rose 0.2 percent in June, and the Bureau of Labor Statistics noted that it was the primary factor in last month’s increase.
Still, on a 12-month basis, shelter inflation eased to 3.8 percent.
Energy prices were another major contributor to the CPI, climbing 0.9 percent from May to June. This was fueled by a 1 percent surge in the gasoline index.
This could have been a one-time price movement driven by geopolitical tensions in the Middle East that sent crude oil prices soaring. They have since fallen and are trading below the pre-conflict levels.
Food prices also climbed 0.3 percent monthly.
After soaring at the beginning of the year, egg prices have stabilized, tumbling for the fourth straight month. In June, they plunged more than 7 percent.
New inflation data were still mixed as to the extent of the impact that tariffs are having on consumer prices.
The indexes for new vehicles and used cars and trucks declined by 0.3 percent and 0.7 percent, respectively. Prices for apparel, a tariff-sensitive product, increased by 0.4 percent.
Service inflation, meanwhile, increased for the first time in more than a year, rising to an annual rate of 3.8 percent.
Market Reaction
The reaction on Wall Street was muted. The blue-chip Dow Jones Industrial Average was little changed in pre-market trading, while the tech-heavy Nasdaq Composite Index remained in positive territory.
Yields on U.S. Treasury securities were mixed, with the benchmark 10-year yield hovering around 4.42 percent.
The U.S. dollar index, a measure of the greenback against a weighted basket of currencies, edged slightly higher, firming above 98.00.
“Fortunately, the report this morning was mostly in line with expectations, and the core [ex-food and energy] numbers told a story of inflation that was in check,” Chris Zaccarelli, CIO for Nightlight Asset Management, said in a note emailed to The Epoch Times.
Traders were closely monitoring the CPI data to determine if it would be enough for the Federal Reserve to lower interest rates at this month’s policy meeting.
CME FedWatch Tool data suggest that the futures market is overwhelmingly expecting a September rate cut.
The odds of a rate cut could change if the inflation figures evolve, Zaccarelli noted.
“If it’s true that inflation is staying in check, then the Fed can go ahead and cut interest rates—potentially as early as September—but if subsequent reports show a different story, then the Fed is going to have to stay on hold even longer,” he said.
By Andrew Moran
