A Sevens Report commentary noted that while June’s headline consumer price index (CPI) met broad expectations, the details revealed “some tariff price pressures may be appearing in the economy.” Headline CPI rose 2.7% year-over-year, slightly above the 2.6% estimate, driven largely by higher energy costs stemming from the Iran/Israel oil shock. Core CPI, which excludes food and energy, came in at 2.9%, in line with forecasts.
While these figures were “no worse than feared,” they still showed an uptick from May’s readings — and that alone was enough to worry markets. The price strength could mark the early signs of inflation driven by the new tariff regime — especially with more duties scheduled to take effect Aug. 1. According to Sevens Report, “There was enough in this report to keep alive concerns that tariffs will stoke inflation.”
Bottom line: While this CPI report doesn’t derail hopes for future Fed rate cuts, it weakens the case for one in September. Markets were initially unmoved, but as the Sevens Report put it: “The longer markets had to digest the report and the details of it, the more of a headwind it put on markets.”
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