Another downside surprise in U.S. June inflation – Rabobank

In
June,
headline
CPI
growth
in
the
U.S.
edged
down
to
3%
from
3.3%
in
May.
That’s
below
consensus
expectations
and
marked
another
downside
surprise
after
May,
Rabobank
macro
strategists
note.

The
odds
are
tilting
towards
a
September
Fed
rate
cut

“That
closely
watched
supercore
measure
posted
a
second
consecutive
outright
decline
(-0.04%
in
May
and
-0.05%
in
June)
to
leave
the
three-month
annualized
basis
down
to
1.3%
in
June.
That’s
the
slowest
reading
since
October
2021
and
just
half
of
the
pre-pandemic
run
rate
of
2.6%.
The
easing
among
core
services
components
was
also
widespread,
with
transport
and
education
services
seeing
monthly
declines
from
May.”

“Energy
CPI
dropped
lower
to
1%
in
June
upon
a
second
monthly
decline
in
gasoline
prices.
Food
CPI
was
little
changed
at
2.2%,
as
slower
reading
for
grocery
CPI
(1.1%)
continued
to
balance
off
still
elevated
inflation
for
dining
out
(4.1%).
The
broader
‘core’
CPI
excluding
food
and
energy
also
dropped
to
3.3%
above
last
year
after
a
smaller
0.1%
monthly
increase
from
May.”

“A
second
U.S.
CPI
downside
in
a
row
in
June
has
added
to
market
odds
for
a
first
rate
cut
from
the

Federal
Reserve
(Fed)
this
September.
After
today’s
CPI
report,
we
think
an
interest
rate
cut
at
the
Fed’s
next
meeting
in
July
is
still
unlikely
but
the
odds
are
tilting
towards
a
September
cut.”