U.S. consumer price index rises modestly in June

The U.S. consumer price index rose modestly on a sequential basis in June. The headline inflation rose 0.1 percent, coming in below market projections. On a year-on-year basis, inflation accelerated to 2.9 percent from May’s 2.7 percent.

The headline index was held back due to a 0.3 percent fall in the energy index. This was in spite of a 0.5 percent rise in the gasoline index, which was more than countered by falls in electricity and natural gas prices. Energy prices rose 12 percent year-on-year, making them a major force elevating headline inflation. Food prices rose modestly by 0.2 percent sequentially and are up just 1.4 percent year-on-year.

Core rate was up 0.2 percent in June, coming in line with expectations. That raised the year-on-year pace to 2.3 percent in May’s 2.2 percent. Stronger prices for core services drove the rise, as core goods prices were unchanged in June. Core services have mainly driven core inflation in recent months, and are now up 3.1 percent year-on-year. Core goods prices have also become slightly less deflationary in recent months. However, they are still down 0.2 percent year-on-year.

Looking into details, prices rose modestly for shelter, as costs for lodging away from home reversed its May spike, leaning against higher costs for rent and owners’ equivalent rent. Prices also rose for medical care, new vehicles and recreation. Leaning against these gains were lower prices for apparel, airline fares and household furnishings and operations.

Import tariffs, both threatened and actual, are unlikely to be a factor in higher inflation in the coming months, noted TD Economics in a research report.

“The Fed is expected to look through the temporary impacts of tariffs on prices when looking at inflation. However, tariffs are a tax, and could become a drag on consumer's purchasing power. That could lead to slower growth, and a slower pace of rate hikes than currently expected”, added TD Economics.

At 16:00 GMT the FxWirePro's Hourly Strength Index of US Dollar was slightly bullish at 69.2073. For more details on FxWirePro's Currency Strength Index, visit http://www.fxwirepro.com/currencyindex