Nicholas A. Juhle, CFA®

Chief Investment Officer

June Inflation – Acceleration Pressures Fed

U.S. inflation came in higher than expected in June, which will keep the Fed on an aggressive tightening path intended to tamp down demand.  Policymakers have already signaled a second 75 bp rate hike to come later this month, which should be considered the base case following today’s report.  Some economists have suggested that June could mark the peak of the current inflationary cycle, but risks remain.  Rising shelter and housing costs, which are stickier and tend to present with a lag, could keep price pressures elevated for longer, even if energy costs moderate.  At the same time, geopolitical risks including strict COVID policies in China and the conflict in Ukraine pose ongoing risks to the supply chain.  The job market remains a bright spot for now, though rising prices are eroding purchasing power and crippling confidence among American workers.

  • Consumer prices (CPI) increased 9.1% year-over-year.  In June, the consumer price index (CPI) increased 9.1% compared to the same period a year ago, up from 8.6% in May.  Expectations ranged from 8.1% to 8.9% with a median of 8.8%.  Core CPI (excludes food and energy) increased 5.9% year-over-year, decelerating for a third straight month from a peak of 6.5% in March.  While price increases were broad-based, energy costs (+42%) including gasoline (+60%) and food (+10%) including groceries (+12%) were among the larger contributors to the year-over-year change.
  • Consumer prices (CPI) increased 1.3% month-over-month.  In June, consumer prices as measured by CPI increased 1.3% compared to May, and accelerating from a 1.0% increase last month.  Expectations ranged from 0.6% to 1.3% with a median of 1.1%.  The month-over-month increase was led by energy costs (+7.5%) and in particular gasoline (+11.2%).  Shelter costs, which represent nearly one third of the consumer price index and tend to increase with a lag, increased 0.6% for a second straight month.  Core CPI (excludes food and energy) increased 0.7% year-over-year.