#USCoreCPIMissesExpectations

*#USCoreCPIMissesExpectations*

Inflation took another step cooler in June — and it wasn’t just gasoline leading the way.

US Core CPI, which excludes food and energy, was flat MoM at 0.0%, missing expectations for a 0.2% gain. It’s the first monthly decline in core prices since March 2017 and only the seventh negative reading since 1985. Year-over-year, core inflation slowed to 2.6% from 2.9% in May, also below the 2.9% forecast.

Headline CPI fell 0.4% MoM, the largest drop since April 2020, pushing the annual rate down to 3.5% from 4.2%. Energy did heavy lifting with a 5.7% monthly decline, led by a 9.7% plunge in gasoline. But the softness was broad: apparel -0.6%, used cars -0.2%, medical care -0.1%, and shelter rose just 0.1%.

Markets reacted fast. Stock futures jumped, Treasury yields dropped, and odds of a July Fed hike evaporated. CME FedWatch now prices only ∼17% chance of a September hike.

Fed Chair Kevin Warsh cautioned against calling “mission accomplished,” saying the Fed remains committed to the 2% target. Analysts also warn June’s relief was energy-driven and may not repeat if oil stays near $CMEamid Middle East tensions.

For now though, the data buys the Fed time — and gives risk assets breathing room.
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