The US Department of Labor announced the Consumer Price Index (CPI) data for June. Accordingly, the cost of living of American consumers decreased by 0.4 percent in June compared to the previous month. CPI decreased on a monthly basis for the first time since May 2020.
Market expectations were that CPI would decrease by 0.1 percent on a monthly basis in this period. CPI increased by 0.5 percent monthly in May. The country's CPI increased by 3.5 percent on an annual basis in June. Market expectations were for the CPI to increase by 3.8 percent on an annual basis. Annual inflation was recorded as 4.2 percent in May.
Energy costs decreased by 5.7 percent in June, after increasing by 10.9 percent monthly in March, 3.8 percent in April and 3.9 percent in May. The decline in the energy index was the biggest determinant of the decline in CPI on a monthly basis, balancing the increases in other items, including housing and food. The energy index increased by 15.7 percent on an annual basis in June. Housing costs increased by 0.1 percent monthly and 3.3 percent annually in June. The food index increased by 0.2 percent on a monthly basis and 3 percent on an annual basis in the same period.
Core CPI, which does not include variable energy and food prices, remained flat on a monthly basis in June, but increased by 2.6 percent on an annual basis. Market expectations were for core inflation to be 0.2 percent monthly and 2.8 percent annually. Core CPI increased by 0.2 percent monthly and 2.9 percent annually in May.
Following the inflation data in the USA that was below expectations, bond interest rates and the dollar decreased, while gold rose sharply. Following the data, the US 2-year bond rate decreased by approximately 7 basis points to 4.19 percent, and the 10-year bond rate decreased from 4.61 percent to 4.56 percent. Dollar Index (DXY) lost 0.5 percent. With the increase in safe haven demand, ounce gold rose by 2.2 percent, reaching above $4,090 and tested the $4,100 level during the session. Ounce silver also increased. It was evaluated in the markets that the inflation data, which remained below expectations despite the rise in oil prices, eased the pressure on the Fed to increase interest rates.