Inflation Rise Mostly Due To Gasoline Prices

The Bureau of Labor Statistics released the latest CPI data this morning. Year-over-year unadjusted Headline CPI came in at 1.75%, which the BLS rounds to 1.8%, up from 1.36% last month (rounded to 1.4%). Year-over-year Core CPI (ex Food and Energy) came in at 1.64% (rounded to 1.6%), little changed from last month's 1.68% (rounded to 1.7%).

Here is the introduction from the BLS summary, which leads with the seasonally adjusted data monthly data:

The Consumer Price Index for All Urban Consumers (CPI-U) increased 0.5 percent in June on a seasonally adjusted basis, the U.S. Bureau of Labor Statistics reported today. Over the last 12 months, the all items index increased 1.8 percent before seasonal adjustment.

The gasoline index rose sharply in June and accounted for about two thirds of the seasonally adjusted all items change. Other energy indexes were mixed, with the electricity index rising, but the indexes for natural gas and fuel oil declining. The food index increased in June as the index for food at home turned up after declining in May.

The index for all items less food and energy increased 0.2 percent in June, the same increase as in May. Advances in the indexes for shelter, medical care, and apparel accounted for most of the rise, with increases in the indexes for new vehicles and household furnishings and operations also contributing. The indexes for airline fares, used cars and trucks, and recreation all declined in June.

The all items index increased 1.8 percent over the last 12 months, an increase from last month's 1.4 percent figure. The index for all items less food and energy has risen 1.6 percent over the last year, the smallest 12-month change since June 2011. The energy index has risen 3.2 percent over the span, and the food index has increased 1.4 percent. More...

The Investing.com consensus forecast was for a 0.2% MoM for Core and 0.3% for Headline. Their YoY forecasts were 1.6% for Core and 1.7% for Headline.

The first chart is an overlay of Headline CPI and Core CPI (the latter excludes Food and Energy) since 1957. The second chart gives a close-up of the two since 2000.

The Target
On the chart below I've highlighted the 2-to-2.5-percent range. Two percent has generally been understood to be the Fed's target for core inflation. However, the December 12 FOMC meeting raised the inflation ceiling to 2.5% for the next year or two while their accommodative measures (low Fed Funds Rate and quantitative easing) are in place.

Federal Reserve policy, which has historically focused on core inflation -- and especially the core Personal Consumption Expenditures (PCE) -- will see that the latest core CPI is below the near-term target range of 2 to 2.5 percent, and the more volatile headline inflation, is well below the target range.