CPI: Cooler Across The Board

Bottom Line: Consumer prices rose less than expected in June, with both core and headline readings up less than 0.2% on the month. The headline CPI is now down to just 3% year-on-year, thanks to base effects and a slowing trend. Core CPI year-on-year was down to 4.86%, still annualizing at 4.1% in the last three months. Owner's Equivalent Rent (OER), the largest component of the core, was up 0.4%, the coolest reading of the recent cycle. Services less rent, a favored indicator of Fed Chair Powell, rose modestly after falling in May but remained very tame with the last three months annualizing at just 0.1%. Overall, while pockets of core price pressures remain, critical categories of inflation are slowly cooling. While the July rate hike from the Fed still looks like the base case, the trend in CPI suggests the path beyond that might be for steady policy rates.