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2026-07-14 14:04:12
[US June CPI Preview: Gasoline Price Decline Expected to Lower Overall Inflation, But Core Inflation Remains a Cautionary Reminder for the Fed] 1. The US June Consumer Price Index (CPI) will be released at 8:30 PM Beijing time on Tuesday. Affected by a 15% month-on-month drop in gasoline prices, the market expects the overall CPI to decline by 0.2% month-on-month, marking the first monthly negative growth since the pandemic. The annual inflation rate is expected to slow to 3.8% from 4.2% in May. 2. However, superficial improvements cannot mask deeper problems. The core CPI, excluding food and energy, is expected to rise by 0.2% month-on-month, and the annual core inflation rate will only slightly decline to 2.8% from 2.9% in May, compared to 2.5% at the beginning of the year. Service sector inflation (including rent, car repairs, entertainment, dining out, etc.) reached an annualized rate of 3.4%, higher than January's 2.9% and the 2010-2019 average of 2.6%, remaining a more stubborn part of the inflation picture. Economists point out that the World Cup may have temporarily boosted service costs in June by driving up demand for hotels, flights, and tickets. 3. The energy backdrop remains volatile. Oil prices rose to around $75 a barrel on Monday after the fragile ceasefire between the US and Iran broke down, with both sides resuming attacks. Oil prices are still well below the high of around $115 during the conflict, but higher than the pre-conflict level of around $65. If the conflict escalates and disrupts the Strait of Hormuz, a key oil shipping route, oil prices face further upside risks. 4. Against this backdrop, new Federal Reserve Chairman Warsh faces a difficult balance. He will testify before Congress for the first time in this capacity this week, needing to demonstrate a serious commitment to curbing inflation while avoiding overly aggressive policy tightening that could lead to excessively tight credit conditions. With core and service sector inflation still well above the Fed's comfort zone, there are considerable doubts about whether inflation can slow fast enough to prevent further interest rate hikes.
