Link Securities | The Department of Labor reported that the US consumer price index (CPI) rose 0.3% in June compared to May, in line with the consensus forecast by FactSet analysts. In June, clothing prices rebounded by 0.4% (versus a drop of 0.4% in May) and transportation services by 0.2% (versus a drop of 0.2% in May), while the growth in healthcare services prices accelerated (0.6% versus 0.2% in May). In turn, growth in housing prices slowed (0.2% versus 0.3% in May) as did prices for basic healthcare products (0.1% versus 0.6% in May), while prices for used cars and trucks fell for the fourth consecutive month (down 0.7% versus a drop of 0.5% in May).
Year-on-year, the US CPI rose by 2.7% in June (2.4% in May), exceeding analysts’ projections of a slightly lower increase of 2.6%. In June, year-on-year house prices rose by 3.8% (versus 3.9% in May). Other prices with notable increases in the last year include healthcare (up 2.8%), motor vehicle insurance (6.1%), furniture and household operations (3.3%) and recreation (2.1%).
The core CPI, which excludes unprocessed food and energy prices from its calculation, rose by 0.2% in June compared to May, slightly less than the 0.3% expected by analysts. Year-on-year, the core CPI rose by 2.9% in June (2.8% in May), also slightly less than the 3.0% estimated by the consensus.
Assessment: The evolution of headline and core inflation in June confirms that, for the time being, these variables have paused in the downward trend seen in recent months. Although the impact of the new tariffs and the weakness of the dollar on US prices during the month is not very clear, what is evident is that, with these levels of inflation, the Federal Reserve (Fed) will not ‘make a move’ at its Federal Open Market Committee (FOMC) meeting at the end of July, maintaining its ‘wait and see’ stance, pending the final outcome of the agreements being negotiated by the US with its main trading partners.
Despite all this, US bond and stock markets initially welcomed the data, reacting positively to the better-than-expected performance of core inflation in June. Bond prices subsequently turned lower. In this regard, it should be noted that futures continue to indicate a probability of more than 60% of a quarter-point cut in September, in addition to continuing to contemplate two cuts, including this one, before the end of the year.
