ABA DataBank: Consumer prices increased at a slower pace

According to data from the Bureau of Labor Statistics, the main consumer price index rose 3.5% year-on-year in June, below market expectations of 3.8%. Headline inflation also eased from 4.2% in May, with the decline largely driven by falling energy prices, which fell 5.7% month-on-month from their peak in May. Core CPI, excluding volatile food and energy prices, was 2.6% year-on-year, compared with 2.9% in the previous month.

The ABA Office of the Chief Economist believes that the June CPI somewhat eased households that were burdened by high gasoline prices. However, it is still very uncertain whether the pullback in oil prices will be sustained. Elevated inflation will continue to weigh on consumer and business sentiment, reduce purchasing power and slow real economic growth. This could be a drag on credit demand, particularly for interest rate-sensitive products such as mortgages and car loans.