Consumer Price Index: June Headline at 1.65%

The Bureau of Labor Statistics released the June Consumer Price Index data this morning. The year-over-year non-seasonally adjusted Headline CPI came in at 1.65%, down from 1.79% the previous month. Year-over-year Core CPI (ex Food and Energy) came in at 2.13%, up from the previous month's 1.99% and above the Fed's 2% PCE target.

Here is the introduction from the BLS summary, which leads with the seasonally adjusted monthly data:

The Consumer Price Index for All Urban Consumers (CPI-U) increased 0.1 percentin June on a seasonally adjusted basis, the same increase as in May, the U.S. Bureau of Labor Statistics reported today. Over the last 12 months, the all items index increased 1.6 percent before seasonal adjustment.

Increases in the indexes for shelter, apparel, and used cars and trucks more than offset declines in energy indexes to result in the seasonally adjusted all items monthly increase in June. The energy index fell 2.3 percent as all of the major energy component indexes declined. The food index was unchanged as the index for food away from home rose but the index for food at home declined.

The index for all items less food and energy rose 0.3 in June, its largest monthly increase since January 2018. Along with the indexes for shelter, used cars and trucks, and apparel, the indexes for household furnishings and operations, medical care, and motor vehicle insurance were among the indexes that increased in June. The indexes for recreation, airline fares, and personal care all declined in June.

The all items index increased 1.6 percent for the 12 months ending June, a smaller increase than the 1.8-percent rise for the period ending May. The index for all items less food and energy rose 2.1 percent over the last 12 months, and the food index increased 1.9 percent. The energy index, in contrast, declined 3.4 percent over the last 12 months. [More…]

Investing.com was looking for no MoM change in seasonally adjusted Headline CPI and 0.2% in Core CPI. Year-over-year forecasts were 1.6% for Headline and 2.0% for Core.

The first chart is an overlay of Headline CPI and Core CPI (the latter excludes Food and Energy) since the turn of the century. The highlighted two percent level is the Federal Reserve's Core inflation target for the CPI's cousin index, the BEA's Personal Consumption Expenditures (PCE) price index.

 

The next chart shows both series since 1957, the year the government first began tracking Core Inflation.

 

In the wake of the Great Recession, two percent has been the Fed's target for core inflation. However, at their December 2012 FOMC meeting, the inflation ceiling was raised to 2.5% while their accommodative measures (low Fed Funds Rate and quantitative easing) were in place. They have since reverted to the two percent target in their various FOMC documents.

Federal Reserve policy, which in recent history has focused on core inflation measured by the core PCE Price Index, will see that the more familiar core CPI is now at the PCE target range of 2 percent.