According to Bureau of Labor Statistics data, the headline consumer price index rose 3.5% year over year in June, below market expectations of 3.8%. The headline inflation was also down from 4.2% in May, and the decline was mainly driven by the fall in energy prices, which dropped 5.7% month over month from its peak in May. Core CPI, excluding volatile food and energy prices, came in at 2.6% year over year, compared to 2.9% in the prior month.
The ABA Office of the Chief Economist believes that June’s CPI offered some relief to households that have been burdened by high gasoline prices. However, it is still highly uncertain whether the retreat in oil prices will be sustained. Elevated inflation will continue to weigh on consumer and business sentiment, erode purchasing power and dampen real economic growth. This could be a headwind for loan demand, particularly for interest rate sensitive products such as mortgages and auto loans.
