What Bloomberg Economics Says
“It was premature for some to preemptively dismiss the June CPI report as old news, as it shows inflation creeping up in places where it can be harder to squash,” said Bloomberg economists Anna Wong and Andrew Husby, in a statement. “The Fed is right to worry about the unmooring of inflation expectations -- and this report raises the chance of an even larger rate hike than 75 basis points down the line.”

Prices for household necessities continued to post outsized increases last month. Gas prices rose 11.2% in June from a month earlier. Prices for energy services, which includes electricity and natural gas, increased 3.5%, the most since 2006.

Biden is traveling to the Middle East this week to discuss energy output with Saudi and other Gulf leaders in hopes of lowering high prices at the pump. Retail gas prices topped $5 on average nationwide in June, though they’ve since subsided somewhat.

Food costs, meanwhile, climbed 1% and 10.4% from a year ago, the largest increase since 1981.

Early earnings results from PepsiCo Inc. show some companies are still successfully passing through recent price surges in commodities. The maker of Fritos and Mountain Dew was able to charge customers about 12% more on average in the second quarter. Even so, the company said volumes have held up well.

The cost of goods rose 2.1% from May while a 0.9% increase in services costs was the largest in more than 21 years. Economists have been expecting consumers to rotate their spending from goods to services as Covid-related concerns fade, but goods prices so far are still elevated.

There’s reason to believe that food and energy costs are subsiding, according to Wells Fargo & Co. economists. Particularly for groceries, “we suspect more significant easing ahead as raw material, transportation and wage costs have started to cool,” they said in a note.

Rents, Shelter
Rent of primary residence rose 0.8% from May, the largest monthly advance since 1986. Owners’ equivalent rent increased 0.7%, the most in nearly 32 years.

While home sales have slowed in recent months due to higher mortgage rates, economists expect rental inflation to continue to increase because it takes time for price changes to feed into the CPI.

The cost of hotel and airline fares, as well as car rentals, fell from May to June, following historic increases in recent months. Even so, recent commentary from U.S. airlines have indicated that travel demand remains strong.