Announced this morning, the Consumer Price Index increased 1.3% in June and 9.1% on an annual basis, higher than expected. Monthly prices for Gasoline, up 11.2%, and Utility Gas Service (natural gas), up 8.2%, were again especially strong. The core rate, which excludes prices for food and energy, increased 0.7% in June and 5.9% on an annual basis, also higher than expected but unlike the headline data, the annual figure for the core rate is slightly lower than the previous month.
Overall, inflationary measures remain stubbornly elevated. Higher energy costs continue to impact consumers despite commodity prices decreasing in recent days amidst ongoing chatter of a potential recession. The Federal Reserve will be steadfast in their mission to combat inflation through rate increases and reducing the size of their balance sheet, especially coupling today’s data with last week’s payrolls report noting a continued healthy labor market. Company earnings reports will also be a key variable for markets in the coming weeks, including their commentary on these cross currents, the strength of demand for their products, and the residual effects of reopening from the pandemic.
In all, the 10-year US treasury yield ticks higher following the report and equity futures move lower as we head into the market open.
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