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July 12, 2019

NAFCU economist: Stronger inflation won't prevent rate cut

cpiOn a seasonally adjusted basis, overall consumer prices increased 0.1 percent in June. Core prices (excluding food and energy costs) advanced by the fastest pace since January 2018. NAFCU Chief Economist and Vice President of Research Curt Long noted that despite stronger price growth, the Federal Reserve is still likely to cut rates later this month.

"Earlier in the year, Federal Reserve officials dismissed weak inflation readings as transitory," said Long in a new NAFCU Macro Data Flash report. "As the months dragged on with no improvement in price growth toward the Fed's target range, officials backed off that view. But this latest reading provides some evidence that those earlier views may have been correct. It is too late for the Fed to reconsider a 25-basis point rate cut later this month – that has already been clearly telegraphed and will happen."

According to data published Thursday by the Bureau of Labor Statistics, the overall CPI grew 1.7 percent over the 12-month period.

Core prices increased 0.3 percent in June compared to the previous month. Year-over-year core CPI growth was 2.1 percent.

Energy prices decreased 2.3 percent in June following a 0.6 percent decline in May. From a year ago, energy prices were down 3.4 percent. Food prices were essentially flat in June. On a year-over-year basis, food prices were up 1.9 percent.

For more data from Long and NAFCU's research team, click here.