#美国核心CPI未达预期 Concerns about the Federal Reserve hiking rates in 2026 may gradually ease—US June CPI commentary

The US released its latest inflation data for June. CPI rose 3.5% year over year and core CPI rose 2.6% year over year, both below market expectations.
1、 Both overall inflation and core inflation dropped sharply, with energy as the key drag. In June, US CPI rose 3.5% year over year and fell 0.4% month over month; the year-over-year growth rate declined 0.7 percentage points from May. Core CPI rose 2.6% year over year, down 0.3 percentage points from May; it was basically flat month over month. From the drivers, on the one hand, the year-ago base for June 2025 increased, putting some downward pressure on the year-over-year growth rate. On the other hand, June international oil prices fell more, with the energy component turning negative month over month, dragging down the overall US inflation level. In addition, core inflation fell more in June as well, suggesting that the endogenous momentum of US inflation may have weakened somewhat. Looking ahead, the high-base effect will still be present. Although international oil prices have recently risen somewhat, the trend of declining year-over-year inflation growth is likely to continue, and core CPI may become a key force driving the subsequent decline in inflation. This will need to be monitored.
2、 Energy inflation growth slowed, and both core goods and services cooled noticeably. Specifically, in June, the energy component rose 15.7% year over year, down 7.8 percentage points from May. The food component rose 3.0% year over year, down 0.1 percentage points from May. For core CPI, core CPI rose 2.6% year over year in June, down 0.3 percentage points from May; month over month it was basically unchanged from May, and both were below market expectations. Among core CPI, the year-over-year growth rate for core goods fell about 0.25 percentage points from May to 0.82%; core services rose about 3.16% year over year, down about 0.26 percentage points from May. The housing component rose 3.3% year over year, a small decline of 0.1 percentage points from May. Overall, in June the core CPI year-over-year growth rate fell more than in May, and both core goods and core services contributed significantly, which may indicate that the resilience of US inflation has weakened somewhat and may become a key factor for continued downside in US inflation going forward.
3、 Inflation may see sustained declines; watch the downward slope of core inflation. Overall, June’s CPI data show a sharp drop in the US inflation level, along with a larger decline in core inflation, which may indicate that the risks of US inflation have been materially alleviated. Judging by “super core services” inflation tracked by the Federal Reserve (core services excluding housing), in June the year-over-year growth rate fell 0.50 percentage points from May to 3.17%, while month over month it fell 0.21%, showing that the endogenous momentum of US inflation has weakened more clearly. Looking ahead, as the base effect rises, US inflation may enter a period of decline for some time. Inflation peaked in May. The uncertainty is whether, if geopolitical conflicts escalate substantially later on, or if other negative shocks hit the economic supply side, the downward slope of inflation could slow down.

2、 The path of inflation downside may not be smooth, but concerns about 2026 rate hikes may gradually fade
First, with the US-Iran conflict recurring and navigation in the Strait of Hormuz being obstructed, it may provide some upward support to global oil prices. Combined with the fact that large US technology companies are still making extensive investments, the support for inflation remains fairly solid, and the downward slope of inflation still contains some uncertainty.
Second, as overall inflation trends downward, the likelihood of the Federal Reserve hiking rates in 2026 is declining, and market expectations for rate hikes in 2026 may also fade. As mentioned earlier, the second half of 2026 faces some supportive factors for the US CPI, but the trend of declining year-over-year growth may be difficult to reverse. June’s CPI coming in below expectations—especially core CPI coming in below expectations—may reinforce confidence in the Federal Reserve keeping interest rates unchanged. Although Federal Reserve Chair Waller said the Fed has “zero tolerance” for persistently high inflation, as we noted in our earlier report, before the research results of five working groups are released, the Fed internally may be inclined to temporarily keep interest rates unchanged. Under the baseline scenario, we believe the Fed in 2026 may lean toward keeping rates unchanged, with any potential hikes appearing only in 2027. The driving factors could include further investment boosting US economic growth, while the labor market remains resilient. In addition, attention needs to be paid to the relevant results from the five working groups.