U.S. Data Pulse: CPI | North America: June CPI: Disinflation started

Research evidence excerpt

U.S. Data Pulse: CPI | North America: June CPI: Disinflation started

UpdateM

June CPI: Disinflation started

CPI came in below our expectations, with core prices falling 0.02% m/m in June (MS:

+0.22%, consensus: +0.2%) and headline prices declining 0.42% m/m (MS: -0.19%).

These readings put core CPI at 2.57% y/y and headline CPI at 3.46% y/y.

Using today's CPI data, we revised our June core PCE inflation forecast down to 0.20%

m/m from 0.25% prior to the release, reflecting softer-than-expected core services ex-

housing inflation. On a 3-, 6-, and 12-month annualized basis, core PCE is tracking at

3.13%, 3.88%, and 3.35%, respectively.

All in, this print is consistent with our view that inflation will decelerate the rest of

the year allowing the Fed to remain on hold.

As highlighted in our CPI preview, three themes were key for this report: (1) whether tariff

pass-through to goods prices continues, as in prior months; (2) the effects of lower oil

prices; and (3) shelter inflation.

First, tariffs. The data continue to suggest that the pass-through may be largely complete.

We estimate tariffs have lifted the overall price level by just over 62bp so far, broadly in

line with the roughly 70bp implied by our models. More importantly, tariffs have not

added meaningfully to core goods inflation since February 2026, based on our estimates.

Second, oil prices. The recent decline in oil prices had a clear impact on June gasoline

prices, contributing to a sharply negative monthly CPI energy reading. Absent further

escalation in the Middle East, we would expect lower oil prices to begin feeding through

to core inflation via softer airfares over the remainder of the summer. Lower oil prices

should also help ease transportation and shipping costs, providing an additional tailwind