CPI Figures Encouraging, But Fed Remains Likely To Hike

The consumer price index increased at a 0.2% monthly rate for June. The increase was the same for both the headline rate, and for core inflation, which excludes food and energy. That’s the smallest monthly increase since August 2021, and headline inflation rose at 3%. However, the Federal Reserve is still likely to argue that core inflation rising at a 4.8% annual rate is well above their 2% inflation goal and raise interest rates later this month as a result.

Shelter Costs Coming Down

Perhaps the most encouraging aspect of the June CPI report was that shelter costs rose at a lower rate than in many prior months. The increase for June was a monthly rate of 0.4% for the shelter component. That’s still high, but shows that shelter costs in CPI may be starting to mirror the cooling home prices that we’ve seen in industry data. The lag is not unexpected because the CPI uses a panel approach to measure housing costs that introduces a lag to current pricing, of 6 months or so.