Falling gas prices likely lowered June inflation, Iran conflict may reverse trend
8 reported3 unconfirmed
A government inflation report set for release Tuesday is forecast to show consumer prices dropped 0.2% in June, according to a FactSet survey of economists, which would be the first monthly decline in nearly four years. The decline is attributed to falling gas prices, though renewed combat with Iran has sent oil prices climbing again, potentially undoing progress. Compared with a year ago, prices likely rose 3.9%, down from 4.2% in May. Gas prices have fallen nearly 20% from their late-May peak but rebounded in the past week, averaging $3.87 a gallon Monday, up 7 cents from a week earlier. Excluding food and energy, core prices are forecast to have risen 0.2% in June from the previous month and 2.8% from a year earlier. The slowdown could reduce pressure on the Federal Reserve to raise its key rate, though some officials warn a rate hike may still be needed if core inflation remains high.
What’s reported
The government's June inflation report is due Tuesday, forecast to show a 0.2% monthly drop in consumer prices, the first decline in nearly four years.
Year-over-year inflation is expected at 3.9%, down from 4.2% in May.
Gas prices fell nearly 20% from their late-May peak but rebounded in the past week, averaging $3.87 a gallon Monday, up 7 cents from a week earlier.
Renewed combat with Iran has sent oil prices climbing; Brent crude rose 9.6% to $83.30 on Monday after both the U.S. and Iran claimed control of the Strait of Hormuz.
Core prices (excluding food and energy) are forecast to have risen 0.2% in June from the previous month and 2.8% from a year earlier.
Fed Chair Kevin Warsh, who took over May 22, has declined to signal the Fed's next steps but emphasized focus on the 2% inflation target.
Fed governor Christopher Waller warned a rate hike could be needed if core inflation remains hot, noting core inflation rose from 3% last December to 3.4% in May.
Walmart announced price rollbacks on thousands of items; President Trump praised the move but the company did not mention him in its announcement.
Open questions
Whether the Fed will raise or hold its key rate in the near term.
How long the renewed Iran conflict will affect oil and gas prices.
Whether the June inflation report will show core inflation cooling as forecast.
Key figures
Kevin Warsh, Federal Reserve Chair (took over May 22)
John Williams, President of the Federal Reserve Bank of New York
Christopher Waller, Federal Reserve governor
Donald Trump, President of the United States
Sources: abcnews.com
