Inflation: Better But Not Good

My extended family has a long-running tradition of Super Bowl parties, which involve some friendly wagering. Every now and then, someone on track to win a squares pool begins counting the prize money…until a last-minute play changes the game’s score. The moral: never celebrate too soon.

Coverage of the recent inflation data took me back to those Super Bowl parties. There is reason for cheer, and I welcome signs of progress. But victory laps are premature; plenty of time remains on the clock.

Let’s start with the good news. The June consumer price index (CPI) carried a headline gain of only 3.0% year-over-year, its lowest reading in over two years. Much of that improvement was driven by lower energy prices. Excluding food and energy, year-over-year core inflation improved to 4.8% from 5.3% a month earlier. Drilling into the data revealed more reasons for optimism: core service prices, a point of emphasis for the Fed, were flat on the month.