Overview
- The June CPI report on July 14 showed consumer prices fell 0.4% from May, bringing headline inflation to 3.5% year over year and core CPI to 2.6% year over year.
- Most of the monthly decline came from energy, which fell about 5.7% as fuel oil and gasoline prices dropped sharply and pulled down the headline rate.
- Markets sharply reduced the chance of a rate increase at the July meeting to the mid-teens, though some tools still show a sizable probability of a hike by September.
- Fed officials including Chair Kevin Warsh, Vice Chair Philip Jefferson, and Kansas City Fed President Jeff Schmid warned one soft print is not decisive and said they remain prepared to raise rates if inflation reaccelerates.
- Regional Fed reports show moderate growth and rising employment but persistent uncertainty over fuel costs, so policymakers are watching core PCE, services and shelter inflation, and oil moves as the next key signals.