Economy

The Bureau of Labor Statistics reported a 0.4% month-over-month headline CPI decline in June 2026, the largest single-month drop since April 2020, driven almost entirely by a 9.7% fall in gasoline prices rather than broad disinflation. Core CPI, which excludes food and energy, was flat on the month and sits at 2.6% year-over-year, still above the Fed's 2% target. The data shifted implied market odds of a July rate hike from 42% to 17%, but with oil prices already rebounding in July, the FOMC is broadly expected to hold rates at 3.50%–3.75% at its July 28–29 meeting.

On July 13, 2026, Federal Reserve Governor Christopher Waller stated that another hot core inflation reading would require the FOMC to consider tightening policy, pushing market-implied odds of a July rate hike from 35 percent to 46.5 percent. His framework ties any future easing to several months of lower inflation readings and the fading of three specific factors: tariff pass-through, which Fed staff assessed as relatively modest and largely exhausted; a 24 percent year-over-year PCE energy spike tied to the Iran conflict; and AI-driven demand spillovers. The speech positioned Waller within the FOMC faction favoring rates above the current target range by year-end, while preserving optionality for cuts if data cooperate, with the earliest credible easing window being the September meeting.

The NFIB Small Business Optimism Index rose 2.1 points to 97.4 in June 2026, its highest reading since February, driven entirely by two forward-looking components: expectations for business conditions jumped 10 points to the first positive reading of the year, and sales expectations rose 8 points. The index has now spent four consecutive months below its 52-year average of 98.0, while a separate finding shows small-business owners reporting their highest rate of actual price increases since January 2023 — on the same morning BLS reported headline CPI fell 0.4 percent, its steepest monthly drop since April 2020, largely on a 9.7 percent decline in gasoline prices.