Inflation Watch A mid-month focus on inflation via Traditional Indexes, Commodity Prices, and Labor Costs
The non-seasonally adjusted headline CPI rose 0.6% (y/y) in June, a bit stronger than market estimates. The Core CPI maintained its 1.2% annual pace (Chart 1), which is also a tad stronger than the market expectations. There was very little market reaction to these new numbers since investors have learned to look through these numbers after COVID-19 and the latest numbers are not enough to impact any policy directions in the near term.
The Core CPI registered its highest YOY increase of the past year. However, a recent NY Fed survey and other inflation forecasts seems to point to softening expectations. During Fed easing regimes, the CPI has been a good indicator of how aggressive the Fed needs to be. The next few months will be critical in assessing our economic situation.