Consumer Price Index Rises To High Side Of Expectations

Jerome Powell back in May was right, apparel prices were destined to recover which headlines a June consumer price report that will not be raising expectations any further for a rate cut at the month-end FOMC.

A 1.1 percent monthly surge in apparel fed a 0.3 percent rise in the CPI core rate. Year-on-year the core is up 1 tenth to 2.1 percent and, like the monthly rate, is at the high side of Econoday's consensus range. The report's two key components -- housing and medical care which together make up about 1/2 the index -- are also on the high side, at 0.3 percent each on the month for respective yearly rates of 3.0 percent and 2.0 percent.

Outside the core, energy prices fell a sharp 2.3 percent on the month with the gasoline subcomponent down 3.6 percent. Energy prices, which are down 3.4 percent on the year, are not helping the Fed achieve its 2 percent inflation goal. Food is just about neutral for the Fed, at 1.9 percent on the year though unchanged on the month. Reflecting energy, the overall CPI edged 0.1 percent higher on the month for a 1.6 percent yearly rate.

Housing is an important key, rising 0.4 percent for rents (3.9 percent on the year) and up 0.3 percent for owners' equivalent rent (3.4 percent on the year). These are fundamental costs for the consumer and the tangible pressure provides a steady to rising floor for the core. Today's report points to an upward move for the Fed's preferred inflation gauge, the PCE core index to be posted at month-end (last at 1.6 percent). For those FOMC policy makers who aren't completely sold on a rate cut, the CPI will offer key talking points.