The CPI narrative will get tricky for the Fed if the year-over-year percentage change in Headline CPI accelerates higher as we expect it to beginning on August 10th when the July Headline CPI figure is printed.

• June 2022 saw a 9.1% peak Headline CPI print (see table below). June 2022 was the year-over-year percentage CPI peak. This means the year-over-year CPI figure for June 2023 will come in lower than May’s 4.0% print given how prices are trending and given the tough year-over-year comparison for June 2023.

• First lower, then higher. We estimate Headline CPI for June 2023 at 2.9%. From that point the year-over-year comparisons get easier, which means modest sequential growth in absolute prices will translate to accelerating year-over-year CPI increases in July, August and potentially through December 2023 as we have modeled below. This will make it difficult for the Fed to ease policy.

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