If deflation’s still a threat, it wasn’t obvious in today’s update of consumer prices for June.
The CPI jumped 0.7% last month, the government reports. That’s the highest since July 2008, which also posted a 0.7% rise.
Much of the gain in CPI last month came from energy. Nonetheless, core-CPI (excluding food and energy prices) still rose by 0.2%. So far this year, core CPI is up every month. In addition, core CPI’s three-month annual rate is now running at 2.4% through June, or slightly above the Federal Reserve’s long-term top-end target for core inflation. Another intriguing statistic is that while consumer prices overall have fallen 1.4%, based on headline CPI, core inflation is up 1.7%.
What does this tell us? That inflation, while still quite subdued, isn’t dead as a threat in the medium-to-long-term horizon. No, there’s nothing in today’s report that tells us that inflation’s about to return as a material hazard. There’s still plenty of deflationary/disinflationary pressures bubbling to keep a lid on prices overall for the time being. But today’s CPI report reminds that the potential for trouble down the road is still there.