The CPI Relief Is an Optical Illusion: What Warsh and Hormuz Mean for July
The June CPI print looked like good news. Headline inflation fell to 3.5% year-on-year, down from 4.2% in May, and the month-on-month reading of -0.4% was the sharpest monthly decline in over a year. Markets rallied. The conventional read was that the disinflationary trend had resumed and the Federal Reserve would stay on hold through summer, with rate cuts perhaps back on the agenda by early 2027. Key Takeaways June CPI fell to 3.5% YoY, but 100% of the improvement traces to a 5.7% monthly collapse in energy prices tied to a ceasefire that collapsed on July 10, before the data was even published. Gasoline has already risen to $3.86/gal as of July 15, up $0.07 in one week, and the U.S. Navy…
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