Hours: Monday - Friday 8:00 am - 5:00 pm


U.S. June CPI: Persistent top-line inflation hits 9.1%

REAL ECONOMY BLOG | July 13, 2022

Authored by RSM US LLP

The past few years have been characterized by a series of economic shocks that have wreaked havoc with just about every area of the American economy.

Energy costs rose by 41.6% on a year-ago basis, while gasoline costs have advanced at a 60.6% rate.

The most recent set of energy shocks has sent the top-line consumer price index to 9.1%, a four decade high, on the back of an 11.2% increase in gasoline prices and a 7.5% jump in overall energy prices, according to Labor Department data released Wednesday.

Energy costs rose by 41.6% on a year-ago basis, while gasoline costs have advanced at a 60.6% rate.

Perhaps more troubling than the top-line increases, though, is the inflation inside the housing sector, where costs increased by 7.3% on an annual basis.

That’s well above the 5.9% core inflation rate, which implies that efforts to restore price stability will require the Federal Reserve to push the federal funds rate into restrictive terrain and keep it there for an uncomfortably long time.

These increases have created the conditions where it is increasingly difficult to make the case that the economy will achieve anything resembling a soft landing.

In our estimation, the June inflation data will prompt the Federal Reserve to raise its policy rate by 75 basis points at its next meeting on July 27.

We anticipate another 125 basis points of rate hikes by the end of the year—putting the policy rate in a range between 3.25% and 3.5%—before the central bank considers any pause in its effort to restore price stability to ascertain the direction of growth, employment and inflation, if indeed the central bank is willing to take that risk.


Given the 18% decline in oil prices and 7% drop in gasoline costs since the middle of June, the July data will provide some relief to top-line inflation. But the type of persistent inflation that we now observe will require sustained policy attention out of the Fed to restore price stability.

It is important to note that price movements inside the owners’ equivalent rent series, which is the most critical component of the housing data, accounts for roughly one-third of the core CPI estimate. With that metric now advancing at a 5.5% rate, any thoughts about a near-term pause in the Fed’s efforts to restore price stability is wishful thinking.

In addition, risks to the outlook linked to the global price movements in energy suggest that declaring a peak in inflation is a fool’s errand. While the price of oil has declined on easing global demand, it would not take much to cause a reversal and send those prices back up and inflation higher with it.

The data

Overall inflation increased by 1.3% on the month and by 9.1% on a year-ago basis, while core pricing excluding food and gasoline increased by 0.7% in June and by 5.9% on a year-over-year basis.

The primary catalyst for that increase was the 7.5% rise in the energy sector. Service costs increased by 0.9% and were up by 6.2% from a year ago.

The housing complex experienced an increase of 0.8% in June, while shelter costs rose by 0.6% and the policy sensitive owners’ equivalent rent series advanced by 0.7%. On a year-ago basis, costs increased by 7.3%, 5.6% and 5.5%, respectively.

Monthly CPI change

Food and beverage costs increased by 1% on the month and by 10% from a year ago, while apparel prices increased by 0.8% and by 5.2% over the same time frames. Food costs increased by 10.4% over the past year.

Transportation costs increased by 3.8%, new vehicle prices advanced by 0.7%, used truck and car costs jumped by 1.6% while airline fares declined by 1.8%, all in June.

Medical costs increased by 0.7% in June and were up by 4.5% over the past year.

The takeaway

Inflation continues to broaden out with price increases inside the core implying that it will require strong and sustained policy action out of the Federal Reserve, and that will carry the risk of sending the economy into recession early next year. In our estimation, there is a 45% probability of a recession over the next 12 months as the economy absorbs another 200 basis-point increase in the policy rate.

Let's Talk!

Call us at (325) 677-6251 or fill out the form below and we'll contact you to discuss your specific situation.

  • Topic Name:
  • Should be Empty:

This article was written by Joseph Brusuelas and originally appeared on 2022-07-13.
2022 RSM US LLP. All rights reserved.

RSM US Alliance provides its members with access to resources of RSM US LLP. RSM US Alliance member firms are separate and independent businesses and legal entities that are responsible for their own acts and omissions, and each is separate and independent from RSM US LLP. RSM US LLP is the U.S. member firm of RSM International, a global network of independent audit, tax, and consulting firms. Members of RSM US Alliance have access to RSM International resources through RSM US LLP but are not member firms of RSM International. Visit rsmus.com/about us for more information regarding RSM US LLP and RSM International. The RSM logo is used under license by RSM US LLP. RSM US Alliance products and services are proprietary to RSM US LLP.

Condley and Company, LLP is a proud member of the RSM US Alliance, a premier affiliation of independent accounting and consulting firms in the United States. RSM US Alliance provides our firm with access to resources of RSM US LLP, the leading provider of audit, tax and consulting services focused on the middle market. RSM US LLP is a licensed CPA firm and the U.S. member of RSM International, a global network of independent audit, tax and consulting firms with more than 43,000 people in over 120 countries.

Our membership in RSM US Alliance has elevated our capabilities in the marketplace, helping to differentiate our firm from the competition while allowing us to maintain our independence and entrepreneurial culture. We have access to a valuable peer network of like-sized firms as well as a broad range of tools, expertise and technical resources.

For more information on how Condley and Company can assist you, please call (325) 677-6251.

Share This