US Economics: Inflation Weekly—The start of softer summer CPI

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US Economics: Inflation Weekly—The start of softer summer CPI

US Economics

13 July 2026 Citi Research

Inflation data over the next few months will likely show even more of a divergence

between CPI and PCE inflation. In our forecasts, core CPI falls below 2.5%YoY by

August with softer upcoming monthly readings while core PCE remains above 3%.

With revisions, we are estimating a 2.8%Q4/Q4 increase in core PCE this year.

Factors influencing our inflation assessment last week:

(↓) Our final, detailed forecast is for a 0.19%MoM increase in core CPI in June,

slightly lower than the 0.21% we were previously penciling in. The year-on-year rate

would fall to 2.8% from 2.9%. This includes modest core goods prices with minimal

signs of pass-through from higher energy prices, further slowing in shelter

inflation, a modest decline in motor vehicle insurance, and essentially flat airfares.

Relative to our forecast, we see upside risks to components like used car prices and

hotels, and downside risks to household furnishings, apparel, and airfares.

Currently, we are penciling in a 0.29%MoM increase in core PCE in June. This initial

estimate will use the old PCE methodologies for legal services, portfolio

management services, and computer software and accessories (as will July PCE).

This could mean initial releases for June and July PCE are discounted as stale in

light of revisions to PCE that will come in September.

(↑) We were surprised to see Atlanta Fed wage tracker wages stronger in June

given details of average hourly earnings that suggested stronger average wages

had more to do with compositional changes in employment rather than broader

upward pressure on wages. The one-month (nonsmoothed) Atlanta Fed measure