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Declining gasoline prices kept the Consumer Price Index in check in June as it gained just 0.1 percent.



June CPI, July UI Claims

July 11, 2019
By Robert A. Dye, Ph.D., Daniel Sanabria

Low Inflation Reinforces Fed Rate Cut Expectations

*     The June Consumer Price Index increased by 0.1 percent, as energy prices dropped.
*     Initial Claims for Unemployment Insurance fell by 13,000 for the week ending July 6, to hit 209,000.

Declining gasoline prices kept the Consumer Price Index in check in June as it gained just 0.1 percent. Over the previous 12 months headline CPI is up by 1.6 percent, well below the Federal Reserve’s near-2-percent target. In June, gasoline prices fell by 3.6 percent for the month and this pulled the overall energy price index down by 2.3 percent. So far in July it looks like energy will be a push on the CPI. The food price sub-index was flat for the month. Excluding food and energy, core CPI was up by 0.3 percent, its strongest monthly gain since January 2018. Core prices were pushed by a jump in used car and truck prices, which were up by 1.6 percent for the month, reversing a four-month slide. Apparel prices were up by 1.1 percent in July, their first gain in four months. Over the last 12 months core CPI is up by 2.1 percent.

Initial claims for unemployment insurance fell by 13,000 for the week ending July 6, to hit 209,000. Initial claims can be volatile in the summer due to the variability of the seasonal auto assembly plant closures. Continuing claims increased by 27,000 to hit 1,694,000 for the week ending June 29.

Federal Reserve Chairman Jay Powell continues his congressional testimony today, speaking to the Senate Banking Committee. We expect no market-moving news from today’s testimony. We continue to expect to see a 25 basis point cut in the fed finds rate on July 31.

Market Reaction: U.S. equity markets opened with gains. The 10-Year Treasury bond yield is up to 2.08 percent. NYMEX crude oil is up to $60.60/barrel. Natural gas futures are up to $2.47/mmbtu.

For a PDF version of this report, please click here: June CPI, July UI Claims

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