US CPI Preview: June 2023
US CPI Preview: June 2023
Major additional disinflation is likely in June, with spot market rent adjusted inflation likely to fall BELOW 1%. Continuing to tighten amidst such a backdrop risks delivering a deflationary bust.
Executive summary
I expect June’s US CPI report to deliver significant additional disinflation, resulting in the 12th consecutive month of lower annual CPI inflation.
My forecasts are as follows:
Headline CPI: 3.0% vs 4.0% in May
Core CPI: 4.9% vs 5.3% in May
Headline CPI adjusted for spot market rents: 0.5% vs 1.8% in May
Headline core CPI adjusted for spot market rents: 1.7% vs 2.4% in May
In addition to the major decline in the headline CPI, adjusting the CPI for spot market rents shows that June’s inflation report is expected to provide significant additional evidence that high inflation should no longer be a key concern.
At the same time, the Fed’s stubborn focus on the lagging core CPI (which is more heavily exposed to lagging shelter and services prices) risks additional overtightening.
Instead of honing in on “core” inflation and articulating the need for additional interest rate hikes, the Fed should be focusing on the more relevant spot market rent adjusted inflation measures.
The Fed…