14.07.2026 - Easing Inflation, but
US inflation surprised to the downside today, providing financial markets with welcome relief after months of persistent inflation concerns.
Consumer prices rose 3.5% year-over-year in June, below the 3.8% consensus estimate and down from 4.2% in May, as lower energy prices helped ease overall price pressures.
On a monthly basis, the Consumer Price Index (CPI) declined 0.4%, compared with expectations for a 0.2% decline. It marked the largest monthly drop in headline inflation since April 2020.
Core inflation, which excludes the more volatile food and energy components, was unchanged during the month, bringing the annual core inflation rate down to 2.6%, well below the expected 2.9%.
The report suggests that the recent spike in inflation may have been, at least partly, driven by lower energy prices.
While one month's data does not establish a trend, it offers some relief.
Markets:
Equities: Investors remain surprisingly calm despite the renewed escalation
Bonds: US government bond yields fall on softer inflation print, US 10y yield around 4.58%;
Commodities: Oil prices extended rally, with WTI around USD 80/barrel and Brent around USD 85/barrel
Precious metals: move higher, gold to USD 4’050/oz, silver trades near USD 59/oz
Currencies: USD weakens
Cryptos: gain - Bitcoin moving above USD 64k
Volatility: The VIX index fell back below 17
My View: Today's inflation report is undoubtedly in favor for financial markets. However, investors should remember that inflation data is backward-looking.
Particularly in the current environment, with sharp swings in energy prices, it is important to interpret the figures carefully before drawing conclusions. The softer inflation reading was largely expected after oil prices fell from around USD 95 per barrel to nearly USD 70 during the reporting period.
Since then, the environment has changed significantly. Driven by the latest developments in the Middle East, energy prices have already rebounded by roughly 15% this week.
Should the conflict continues or escalates — my view — higher oil and energy prices are likely to feed back into headline inflation. The longer geopolitical tensions persist and oil prices remain elevated, the greater the risk of second- and third-round inflation effects spreading through the broader economy. Higher energy prices have an immediate impact on transportation costs, which eventually feed into the prices of a wide range of goods and services.
For that reason, I continue to believe that markets are underestimating the risk of higher inflation. While today's report is encouraging in the short-term, it should not be interpreted as a definitive signal that the inflation battle has been won. The geopolitical backdrop, and its impact on energy markets remains the key variable to watch.
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