In assessing how Fed policymakers will react to the June CPI data, it may be worthwhile to take a look at not only the month-over-month and year-over-year percent changes, but also what it looks like at the half-year marks for the unadjusted indexes. In parsing the half-over-half percent changes which can reflect shorter-term movements, the indexes point to more rapid declines in upward price pressures in the first half of 2023 versus the second half of 2022 than the second half of 2022 versus the first half of 2022. This may help counsel the FOMC to remain on hold from further rate hikes when they meet on July 25-26 as it would suggest that the lagged effects of past rate hikes are more visible in recent months, and that the 2 percent flexible average inflation target is closer to being met. However, it does not mean that rate cuts are any nearer in the future. That will require that services inflation – especially non-housing services – shows more persistent progress to that goal.
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