US CPI reaction
CIBC Research discusses its reaction to today’s US CPI print for the month of June.
“Price pressures were scorching hot in the US in June, as
surging demand combined with supply chain issues to lead the way higher.
Total monthly prices rose by 0.9%, well above the consensus forecast of
0.5%, leaving annual inflation at 5.4%. A sharp rise in used car prices
accounted for over one-third of that monthly gain, adding to the jump
in energy prices. Excluding energy and food, prices also increased by
0.9% on the month, above the consensus expectation of 0.4%, leaving
annual core inflation at 4.5%, close to a thirty-year high. While used
car prices were a large part of that rise, new vehicles, airfares, and
apparel also contributed to the rise, as some of these categories were
hit early on in the pandemic,” CIBC notes.
“Another upside surprise in inflation suggests more widespread impacts of supply chain issues, and raises further questions about how quickly these factors will fade amidst strong demand. Ultimately, with
economic slack expected to be eliminated later this year, price
pressures should be firm enough through 2022 to see the Fed hike rates
in the second half of that year,” CIBC adds.
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