(Bloomberg) – A key measure of US consumer prices in June was more than projected and may hinder the Federal Reserve's assessment of inflation as policymakers are already considering a rate cut this month.
The report showed broad monthly gains in core categories, including an increase in housing, apparel, clothing, and running costs. The US stock futures fell after the report, while the yield on 10-year government bonds has risen.
The firmer inflation figures follow Fed Chairman Jerome Powell's testimony to Wednesday's legislators that there is a risk that weak inflation will last even longer than we anticipated. "Also on Wednesday, the minutes of the June session showed that the uncertainties and risks to the economic outlook assessed by officials had increased significantly, reinforcing the argument for a rate cut at its meeting on July 30-31.
Inflation as measured by The Fed's preferred yardstick was 1.5% in May, largely below target for the last seven years, while the closely watched core index rose 1.6%. President Donald Trump, who along with his staff repeatedly put pressure on the Fed to cut interest rates to support growth, also cited low inflation as the reason for the easing.
The VPI report showed that prices for used cars and trucks were up 1.6% month-on-year and 1.2% year-on-year. Textile goods, which have been volatile in recent months, rose 1.1% month-on-month, and fell 1.3% per year.
Energy prices fell 2.3% month-on-month as gasoline prices fell 3.6%. The cost of food remained unchanged.
The cost of accommodation, which accounts for about one-third of the total CPI, rose 0.3% m / m, as did rents by owner, one of the categories that track rents. The rent of the main residence increased by 0,4%.
A separate report from the Labor Department on Thursday showed that jobless claims fell to their lowest level since mid-April, indicating a robust labor market.
Unemployment claims dropped back by 13,000 to 209,000 in the week ended July 6, among all estimates of a Bloomberg survey among economists who had forecast 221,000. The reporting period included the holiday on 4 July, which may increase the volatility of the measurements.
The index for household equipment and services rose 0.8% month-on-month, the highest since 1991, reflecting a record 6.1% increase in gardening and turf maintenance services. A separate report from the Ministry of Labor on Thursday showed how inflation affects consumers' purchasing power. Price-adjusted average hourly earnings rose 1.5% year-on-year, after rising 1.3% in May. Bloomberg's economists had predicted that key indicators would rise 0.2% mom and 2% yoy. The broader index remained flat versus the previous month, slowing from 1.8% in May to 1.6% % in the year.
(Updates to add market reactions in paragraph 3, graph, and the "More Information" section.)
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