Food prices posted an increase of 0.3%, which is inspired by high costs for beverages (+1.4%) and fruits and vegetables (+0.9%). Egg prices declined by 7.4%, although beef saw a growth of 2.0%. The food index increased to 3.0% year-on-year in total, with the food away from home to 3.8%, which constantly exposes service inflation.
The core inflation remains sticky, puts pressure on the Fed Outlook
Except for food and energy, the core CPI increased by 0.2% in June, which corresponds to the growth of the previous month. On an annual basis, the core inflation was stable at 2.9%, which indicates constant value pressure in services and selects consumer goods. The remarkable increase occurred from medical care services (+0.5%), household items (+1.0%), and garment (+0.4%). However, the prices of the vehicle used decreased by 0.7%, while the new vehicle prices fell 0.3%.
The airline fares declined again (-0.1%), helping service inflation somewhere else. Traders should note that transport services submerged a time of 0.1% month to reduce widespread inflation concerns in this category.
Will the Federal Reserve react?
The headline may complicate the policy approach of the upper Federal Reserve under inflation and stable core pressure. While the year-on-year inflation remains below the target of 2% of the Fed, the consistent core reading and strength in the shelter and service components suggest that inflation is not yet completely under control. Market participants should monitor upcoming labor data and July CPI for additional policy signals.
Market forecast: neutral for slight recession
The short -term market spirit is neutral to equity and slightly recession for bonds. Constant core inflation under the leadership of services and shelters can be cautious about the rate cut in rate. Treasury yields can remain elevated in the near period, and can see additional pressure until the rate-sensitive regions-specifically showing a solid in data inflation coming up to technology and real estate-inflation.
