The core CPI for the month of June in the US is expected to be hotter than the May report. But consumer inflation may have finally reached its peak due to the drop in oil and gasoline prices in July.
Today, markets are awaiting the release of consumer price numbers (inflation) in the US. The core CPI is expected to rise 1.1 percent compared to 1 percent in May, according to Dow Jones. On an annual basis, the consumer price index is expected to rise to 8.8 percent, compared to 8.6 percent in May, the highest level since 1981.
On the other hand, core inflation is expected to continue decelerating, and is now decelerating for the third month.
Excluding energy and food, the core consumer price index for the month of June is expected to record 0.5 percent, compared to 0.6 percent in May. That would be a 5.7 percent year-on-year jump in June, down from 6 percent in May. The core CPI peaked at 6.5 percent in March.
While economists expect June to be the hottest month for core consumer inflation, they also warn that it will depend on what happens to energy prices, and that remains unknown.
Since the beginning of the month, West Texas Intermediate crude futures are down 9 percent, and gasoline futures are down 7.6 percent. Unleaded gasoline hit a record $5,016 a gallon on June 14 and has since fallen to $4.65 a gallon, CNBC reported.
As for the Federal Reserve, economists say the hot inflation figure should bolster the view that the central bank will raise another 75 basis points for June’s three-quarter point increase.
On Monday, US Federal Reserve member Thomas Barkin made statements about inflation, in which he said that he has concerns about changes in the aftermath of the Corona pandemic, its impact on inflation and the difficulty of its decline. He also expressed concern about whether the US would have the financial capacity to fight a recession in the future.
“We have room to reduce inflation, but economic stagnation is possible… We expect inflation to decline, but not immediately or predictably,” he added.
Earlier, a member of the US Federal Reserve in St. Louis James Bullard stated that the lessons learned from 1974 and 1983, when the FOMC faces inflation levels similar to current inflation levels, requires policy makers to anticipate inflation. Bullard added that anticipating inflation would keep it low and stable and boost economic growth.