Inflation drops some in June, does not yet indicate inflation relief is here to stay: CEI analysis

The Consumer Price Index report for June fell 0.4 percent, mostly canceling out May’s 0.5 percent increase. While this may provide some immediate relief from inflation, renewed conflict in the Middle East will likely create higher prices that will be reflected in future reports.

CEI senior economist Ryan Young:

“June’s inflation relief is likely temporary. The latest Iran flare-up will likely push July’s inflation numbers back up. Uncertainty about the president’s strategy and goals in Iran make it unlikely that energy prices will come back down to pre-war levels until at least next year.

“Underlying monetary inflation has stayed roughly the same for the last several months, meaning that CPI would be closer to target levels if not for tariffs and Iran. Tariffs have not been in the news as much lately, but they are continuing to push prices up as they work their way through supply chains.

“Look for the Fed to keep rates steady at its next interest rate meeting in two weeks, although the longer the Iran war lasts, the more likely a rate increase becomes later this year.

CEI finance and monetary policy analyst Steve Swedberg:

“Today’s CPI report provides some welcome relief, but it is far from signaling a return to price stability. Americans have now experienced more than five years of inflation above the Federal Reserve’s stated target of 2 percent. More to the point, today’s report does little to erase the lasting increase in the cost of living that Americans have endured. 

“It is worth noting that the June data capture a period before renewed uncertainty in the Middle East threatened to push energy prices higher. Future inflation reports may look considerably different if those pressures continue, which underscores why one month’s worth of encouraging data should not be mistaken for a lasting trend.”