• June CPI data
U.S. CPI rose 2.7% year-on-year in June , the highest since February, with an expected 2.6 % and a previous value of 2.4 %; it rose 0.3 % month-on-month , with an expected 0.3 % and a previous value of 0.1 %. The core CPI rose 2.9% year-on-year , with an expected 2.9 % and a previous value of 2.8%; it rose 0.2% month-on-month , with an expected 0.3 %, which was lower than expected for the fifth consecutive month, with a previous value of 0.1 % .
From the sub-items:
- Food prices rose 0.3% month-on-month . Grocery prices rose 0.3% month-on-month. Beverage, coffee and agricultural product prices all rose in June. Beef, in particular, rose 2% that month. However, egg prices fell 7.4% month-on-month. The cost of dining out rose 0.4% month-on- month .
- Energy prices rose 0.9 % in May after falling 1.0 % in May , the largest increase since January. Natural gas prices rose 0.5 % month-on-month, electricity prices rose 1.0 % month-on-month , and gasoline prices rose 1.0 % month-on-month, also the largest increase since January.
- Housing costs rose 0.2% in June after rising 0.3% for two consecutive months . Among them, rental inflation rose 0.2% month-on - month . Owner equivalent rent (OER) rose 0.3% month-on-month. The away-from-home accommodation index, which includes hotel prices, fell 2.9% month-on-month in June after falling 0.1% in May.
- Furniture prices, which are more affected by tariffs, rose 1% month-on-month, the biggest increase since inflation surged in January 2022; toy prices rose 1.8% month-on-month, the biggest increase since April 2021; clothing prices, which are expected to be most affected by tariff increases, rose 0.4% month-on-month in June after an unexpected 0.4% drop in May; personal care product prices rose 0.3%.
- Growth in the cost of health care services began to accelerate, increasing to 0.5% from 0.3% in May.
- The main factors for the lower-than-expected core CPI in June included a decrease in used car and truck, new car and airfare prices from the previous month. Used car and truck prices continued to fall by 0.7% in June after falling by 0.5% in May, new car prices fell by 0.3%, and airfares fell by 0.1%.
• After the data is released:
After the data was released, traders' expectations for a pause in inflation in July increased. CME FedWatch showed that the probability of the Federal Reserve maintaining the benchmark interest rate between 4.25% and 4.5% in July was 97.4%, higher than 93.8% on Monday; the probability of a 25 basis point rate cut in September was 59.9%, slightly higher than 58.9% on Monday.
U.S. stock futures extended gains, with Nasdaq futures up 0.72% and S&P 500 futures up 0.46%; U.S. bond yields fell, with the 10-year U.S. Treasury yield, which is a benchmark for mortgages and other interest rates, falling to 4.4%; the U.S. 30-year Treasury yield fell to 4.9306%, a new daily low. However, the 10-year Treasury yield subsequently approached 4.5% ; the U.S. 30-year Treasury yield rose above 5%, the first time since early June. Wall Street has been closely watching the 5% level because it has only been broken nine times in the past 15 years. Rising yields mean that the value of the underlying bonds is falling, which is bad news for existing holders and more favorable for new buyers in the bond market, while also prompting capital to withdraw from the stock market. Over the past three days, the 30-year Treasury yield has been on an upward trend, slowly approaching the 5% level. President Trump has repeatedly called on the Federal Reserve to cut interest rates, which does not bode well for long-term bond investors, who believe that the central bank's political independence is key to maintaining stability. In addition, while core inflation has been lower than expected, some commodity prices have risen sharply, indicating that American companies have paid higher import tariffs to customers. Rising inflation erodes the expected return of bonds while also pushing up yields. The bond market pushed the S&P 500 lower, while technology companies continued to support its rise. Today, the S&P 500, a benchmark for the stock market, fluctuated between small gains and losses, while the Nasdaq, which has a high proportion of technology stocks, rose .
Nick Timiraos, WSJ reporter and "Fed mouthpiece": June CPI data has limited impact on Fed policy, and interest rate cuts still need to be cautiously watched. Today's CPI report is a bit "a matter of opinion". "If you think the worst of tariff-driven price increases has not yet arrived, then this report will not change your basic view. If you think that inflation will be transmitted more slowly and have less impact as companies strive to maintain market share in an economic environment with weakened demand, this report will not change your view either." June inflation data was mediocre, and more signals are still needed. CPI data was slightly softer, lower than some forecasters expected, but the key is that most forecasters expect the impact of tariffs to be more obvious in July and August. "See you on August 12, when the July CPI is released."
Goldman Sachs Kay Haigh, Global Co-Head of Fixed Income and Liquidity Solutions at Asset Management: While today's CPI data showed some early signs of the impact of tariffs, overall, underlying inflation remains mild. However, price pressures are expected to strengthen in the summer, and the July and August CPI reports will be important barriers to overcome. For now, the Fed remains on the sidelines. However, if underlying inflation continues to remain mild, the Fed may still restart the easing cycle in the fall.
Bloomberg Economic Research US Team: The core CPI rose slightly in June, mainly because companies passed on tariff costs to consumers more quickly, but the decline in non-essential consumption (such as falling car and hotel prices) offset this effect. The sluggish core inflation data may once again trigger the White House's dissatisfaction with the Fed's slow pace of interest rate cuts, and Trump may take the opportunity to further pressure Powell to step down. PCE data may remain high throughout the summer, reflecting the lagging effect of the stock market rebound since mid-April. We still expect the Fed to cut interest rates only once in 2025, that is, at the last meeting of the year in December. "
Trump posted on social media platforms and once again asked the Federal Reserve to cut interest rates, "Consumer Prices LOW. Bring down the Fed Rate, NOW!!!" "Fed should cut Rates by 3 Points. Very Low Inflation. One Trillion Dollars a year would be saved!!!"
“All this political pressure on monetary policymakers could actually backfire on Trump,” said Steven Ricchiuto, chief U.S. economist at Mizuho Securities USA. “With the economy already on an above-trend growth trajectory and underlying inflation trend rate at 3% instead of 2%, easing policy would unleash inflation expectations and raise the inflation risk premium in the process.”
• Comment :
As Trump's tariffs begin to slowly affect the US economy, consumer prices rose in June, but overall they were still milder than market expectations. The main reason is that the automotive and travel-related sectors still put downward pressure on the overall and core CPI. But at the same time, sectors with a high proportion of imported durable goods have shown obvious upward pressure due to tariffs. Although the rush to buy stocks has reduced the need to raise commodity prices, as pre-tariff inventories decrease, it will become increasingly difficult for companies to absorb higher import tariffs. In order to no longer compress profit margins, they will turn to price increases. Tariff-related inflationary pressures will continue to expand and affect a wider range of commodity categories in the coming months. We expect tariffs to further increase consumer prices in the coming months. The overall risk of inflation is still biased to the upside. Combined with the trend of price differentiation, it is the wisest choice for the Federal Reserve to continue to wait and see until the inflation and employment prospects are clearer. Trump announced last Saturday that the United States will impose a 30% tariff on the European Union and Mexico from August 1; on Monday, Trump threatened to impose a "secondary tariff" of "about 100%" on Russia's trading partners. The risk of further escalation of tariffs is increasing, and the upside risks brought by trade policies remain.
Fed Chairman Jerome Powell recently suggested the central bank may have a slightly lower bar for rate cuts than it did in the spring, when a larger tariff increase threatened to push up prices and weaken the economy. The shift reflects an assessment by the Fed that if the central bank continues to forecast a less-dramatic acceleration in inflation, officials could open the door to rate cuts as early as September, based on a softening labor market and better inflation data. If inflation pressures build in the coming months, the bar would rise again.