Interest Rate Roundup

Wednesday, July 18, 2007

The details on CPI

Lots of data hitting the tape this morning. Let me try to tackle the June Consumer Price Index first:

* The overall CPI rose 0.2% from May, slightly above the 0.1% rise that was expected. That puts the year-over-year increase at 2.7%.

* The "core" CPI -- which excludes food an energy -- gained 0.2%, in line with expectations. The YOY increase came in at 2.2%.

* Services inflation continues to rise at a fairly hefty pace -- o.3% on the month and 3.4% YOY. Ditto for ex-energy services. There weren't a ton of standout categories. Apparel prices were down fairly sharply (-0.6%), while tobacco prices were the upside leader among broader categories at +0.5%.

The bottom line: Inflation remains above the Fed's target zone (1%-2% on the core CPI). It will likely stay that way due to the weak dollar, some pass-through of rising commodity prices, and other forces.


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