The Consumer Price Index (CPI) was unchanged between May and June, as receding prices at the pump were partially offset by increases in prices elsewhere. Food prices edged higher, but much of the increase took place prior to the drought that hit much of the country. Fresh vegetables and fruit, in particular, are likely to trend higher over the summer. We also could eventually see some increase in meat and dairy prices, as grain and corn are critical to feed for cattle and chickens. The core CPI, which excludes food and energy, was also fairly tame, rising 0.2% for the month. Transportation services fell (they had been rising) and used car prices, which had been skyrocketing, were unchangesd. Other categories, with the exception of medical services, posted mostly modest gains.
Bottom Line: Inflation has abated fairly substantially from early in the year, mostly on lower energy costs. We could see some change in the mix of gains in the months ahead, particularly as higher food prices work their way through the system, but underlying inflation remains relatively tame. This is a point not lost on the Federal Reserve, as board members weigh whether to do more at their next meeting.