Wells Fargo: Core CPI Likely Hasn't Peaked

Wells Fargo analysts saw the June CPI report as setting 75bp at the July FOMC meeting as the "floor rather than the ceiling" for "what the central bank will do to combat this relentless price pressure."

• They saw the beat in core inflation as "generally broad-based". Among the few areas of deflationary progress, travel services gave some ground, but the retreat in airfares "was hardly impressive after two months of double-digit gains that leave prices still up 34% year-over-year."
• Particularly unwelcome is the "resilient upward pressure" in core goods prices.
• While some analysts have seen the June deceleration in core Y/Y inflation as potentially denoting a peak, Wells Fargo points out: "the three-month annualized rate of core CPI inflation was 7.9%, which suggests core CPI inflation may have even accelerated in recent months. Coupled with low base effects ahead, we have likely not seen the year-over-year rate of core CPI peak yet."