Consumer Price Index: Headline & Core Below 2% Again

The Bureau of Labor Statistics released the June Consumer Price Index data this morning. The year-over-year non-seasonally adjusted Headline CPI came in at 1.63%, down from 1.87% the previous month. Year-over-year Core CPI (ex Food and Energy) came in at 1.70%, down from the previous month's 1.73%.

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

The Consumer Price Index for All Urban Consumers (CPI-U) was unchanged 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 rose 1.6 percent.

The energy index declined again in June, falling 1.6 percent; this offset an increase in the index for all items less food and energy. All the major energy component indexes declined, with the gasoline index falling 2.8 percent. The food index was unchanged in June, with the index for food at home declining slightly as five of the six major grocery store food group indexes decreased.

The index for all items less food and energy rose 0.1 percent in June, its third straight such increase. The shelter index continued to rise, and the indexes for medical care, motor vehicle insurance, education, and personal care also increased. The indexes for airline fares, used cars and trucks, wireless telephone services, and new vehicles were among the indexes that declined in June.

The all items index rose 1.6 percent for the 12 months ending June; this measure has been declining steadily since February, when it was 2.7 percent. The index for all items less food and energy rose 1.7 percent for the 12 months ending June, the same increase as for the 12 months ending May. The energy index rose 2.3 percent over the last year, while the food index increased 0.9 percent. [More…]

Investing.com was looking for a 0.1% increase MoM in seasonally adjusted Headline CPI and 0.2% in Core CPI. Year-over-year forecasts were 1.7% for Headline and 1.7% for Core.

The first chart is an overlay of Headline CPI and Core CPI (the latter excludes Food and Energy) since the turn of the century. The highlighted two percent level is the Federal Reserve's Core inflation target for the CPI's cousin index, the BEA's Personal Consumption Expenditures (PCE) price index.

Headline and Core CPI since 2000

The next chart shows both series since 1957, the year the government first began tracking Core Inflation.

Headline and Core CPI

In the wake of the Great Recession, two percent has been the Fed's target for core inflation. However, at their December 2012 FOMC meeting, the inflation ceiling was raised to 2.5% while their accommodative measures (low Fed Funds Rate and quantitative easing) were in place. They have since reverted to the two percent target in their various FOMC documents.

Federal Reserve policy, which in recent history has focused on core inflation measured by the core PCE Price Index, will see that the more familiar core CPI is currently at the PCE target range of 2 percent.