#美国核心CPI未达预期 Concerns about the Fed’s rate hikes in 2026 may gradually fade—U.S. June CPI commentary


The U.S. released its latest inflation data for June. CPI rose 3.5% year on year and core CPI rose 2.6% year on year, both coming in below market expectations.
I. Both overall inflation and core inflation saw a significant drop, with energy as the key drag
1 Both overall inflation and core inflation fell notably, with energy as the key drag. In June, U.S. CPI rose 3.5% year on year and fell 0.4% month on month. The year-on-year growth rate fell by 0.7 percentage points from May. Core CPI rose 2.6% year on year, down 0.3 percentage points from May; month on month it was essentially flat versus May. From the driving factors, on the one hand, the year-ago base for June 2025 rose, putting some downward pressure on the year-on-year growth rate. On the other hand, international oil prices fell sharply in June; the energy component turned negative month on month, dragging down the overall inflation level in the U.S. In addition, core inflation fell by more in June as well, suggesting that the endogenous momentum of U.S. inflation appears to have weakened. Looking ahead, the high-base effect still exists. Although international oil prices have recently ticked up to some extent, the trend of a decline in the year-on-year inflation growth rate may continue. Core CPI may become the key force behind the continued downward path of inflation, which needs to be watched closely.
2 Energy inflation growth slowed, while both core goods and services cooled noticeably. Specifically, in June the energy component rose 15.7% year on year, down 7.8 percentage points from May; in June the food component rose 3.0% year on year, down 0.1 percentage points from May. For core CPI, core CPI rose 2.6% year on year in June, down 0.3 percentage points from May; month on month it was basically flat versus May and was both below market expectations. Among core items, the year-on-year growth rate of core goods fell by about 0.25 percentage points to 0.82%; core services rose by about 3.16% year on year, down about 0.26 percentage points from May. The housing component rose 3.3% year on year, a slight retreat of 0.1 percentage points from May. Overall, June’s core CPI year-on-year growth rate fell more than May, and both core goods and core services contributed a lot, which may indicate that the resilience of U.S. inflation has weakened somewhat and may become a key factor for the subsequent continued decline in U.S. inflation.
3 Inflation may see sustained pullbacks; focus on the downward slope of core inflation. Overall, June’s CPI data shows a significant drop in the U.S. inflation level, along with a larger-than-usual decline in core inflation, which may indicate a substantive easing of risks to U.S. inflation. Looking at “super core services” inflation tracked by the Fed (core services excluding housing), the year-on-year growth rate in June fell 0.50 percentage points from May to 3.17%, while month on month it also fell 0.21%, showing a clear weakening in the endogenous momentum of U.S. inflation. Looking ahead, as the base effect rises, U.S. inflation may enter a period of decline for some time; inflation has already peaked in May. The uncertainty is whether, if subsequent geopolitical conflicts escalate to a significant degree, or if other negative supply-side shocks emerge in the economy, the downward slope of inflation could slow.
II. U.S. inflation’s decline may not be smooth, but concerns about 2026 rate hikes may gradually ease
First, with the Iran-U.S. conflict recurring and navigation through the Strait of Hormuz being obstructed, it may provide some support to global oil prices. Coupled with the fact that U.S. tech giants are still investing at large scale, the support for inflation remains fairly solid, and there is some uncertainty regarding the downward slope of inflation.
Second, with overall inflation trending down, the likelihood of the Fed raising rates in 2026 is decreasing, and market expectations for 2026 rate hikes may also fade. As mentioned earlier, the second half of 2026 in the U.S. faces certain support factors, but the trend of a decline in the year-on-year growth rate may be hard to reverse. The CPI coming in below expectations in June—especially core CPI—may strengthen confidence that the Fed will keep interest rates unchanged. Although Fed Chair Waller says the Fed has “zero tolerance” for persistent high inflation, as we noted in our earlier report, before the research results from five working groups are released, the Fed’s internal stance may lean toward temporarily keeping rates unchanged. In the baseline scenario, we believe the Fed may be inclined to keep rates unchanged in 2026; any possible rate hikes may only appear in 2027. The driving factors could include further investment pulling U.S. economic growth, and a labor market that remains resilient. In addition, attention should be paid to the results related to the five working groups.
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#美国核心CPI未达预期 Concerns about the Federal Reserve hiking rates in 2026 may gradually ease—U.S. June CPI commentary
The U.S. released its latest inflation data for June. CPI rose 3.5% year over year and core CPI rose 2.6% year over year, both coming in below market expectations.
1. Both headline inflation and core inflation saw a significant drop; energy was the key drag
1 Both headline inflation and core inflation fell meaningfully; energy was the key drag In June, U.S. CPI rose 3.5% year over year and fell 0.4% month over month; the year-over-year growth rate fell by 0.7 percentage points from May. Core CPI rose 2.6% year over year, down 0.3 percentage points from May; on a month-over-month basis it was roughly flat versus May. Looking at the drivers, on one hand, the June 2025 base effect increased, putting some downward pressure on the year-over-year growth rate; on the other hand, international oil prices fell more in June, with the energy component turning negative month over month, dragging down overall U.S. inflation. In addition, core inflation fell more in June as well, suggesting that the endogenous momentum of U.S. 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 CPI year-over-year growth is expected to continue, and core CPI may become a key force driving further downside in inflation going forward—this warrants ongoing attention.
2 Energy inflation growth slowed, while core goods and services both 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 in June, down 0.1 percentage points from May. For core CPI, in June core CPI rose 2.6% year over year, down 0.3 percentage points from May. Month over month it was roughly flat versus May and both were below market expectations. Among core components, the year-over-year growth rate of core goods fell by about 0.25 percentage points from May to 0.82%; core services rose by about 3.16% year over year, down about 0.26 percentage points from May. The housing component rose 3.3% year over year, a modest pullback of 0.1 percentage points from May. Overall, June’s 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 U.S. inflation has weakened somewhat and may become a key factor for U.S. inflation continuing its downward path.
3 Inflation may see sustained further declines; watch the downward slope of core inflation Overall, June’s CPI data show a substantial drop in U.S. inflation and a larger-than-expected decline in core inflation, which may indicate that the risks of U.S. inflation have been materially reduced. Judging by the “super core services” inflation tracked by the Federal Reserve (core services excluding housing), in June the year-over-year growth rate fell by 0.50 percentage points from May to 3.17%, and month over month it fell by 0.21%, indicating that the endogenous momentum of U.S. inflation weakened notably. Going forward, as the base effect rises, U.S. inflation may enter a period of decline for some time. Inflation already peaked in May. The uncertainty is whether, if subsequent geopolitical conflicts escalate to a larger degree, or if other negative supply-side economic shocks occur, the downward slope of inflation could slow down.
2. The path of U.S. inflation lower may not be smooth, but worries about a 2026 rate hike may gradually fade
First, due to repeated tensions in the Iran-Iraq conflict and shipping disruptions through the Strait of Hormuz, there may be some upward push on global oil prices. Combined with the fact that major U.S. technology companies are still making large-scale investments, support for inflation remains fairly solid, and there is some uncertainty around the slope of inflation down.
Second, with inflation overall trending downward, the likelihood of the Federal Reserve hiking rates in 2026 is decreasing, and market expectations for a 2026 rate hike may also retreat. As discussed earlier, the second half of 2026 in the U.S. faces certain supportive factors for inflation, but the downward trend in the year-over-year growth rate may be difficult to reverse. The June CPI coming in below expectations—especially the core CPI coming in below expectations—may strengthen confidence in the Federal Reserve maintaining the current interest rate level. Although Fed Chair Waller says the Fed has “zero tolerance” for persistently high inflation, as we noted in our earlier report, before the research results from five working groups are released, the Fed may internally lean toward temporarily keeping rates unchanged. Under the baseline scenario, we believe the Fed may be inclined to keep rates unchanged in 2026, and any potential rate hikes would likely occur only in 2027. The driving factors could include further boosting of U.S. economic growth via investment, and a labor market that maintains resilience. In addition, it is necessary to keep an eye on the outcomes related to the five working groups.
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