The minutes of the June meeting of the Federal Reserve Open Market Committee noted concerns among committee members that on-going trade negotiations and slowing economic growth abroad since their previous meeting had increased the downside risks for economic activity. However, as the labor market remained strong and economic activity continued to grow at a moderate pace, the committee voted 9-1 to maintain the current 2-1/4 to 2-1/2 percent federal funds rate. Concerns regarding slowing growth were addressed by nearly all members lowering future rate projections and by several members making a case for using a near-term rate cut as a risk management measure to cushion the effects of possible future adverse shocks to the economy.

A -3.6% drop in gasoline prices in June pushed the overall consumer price index down to a +0.1% gain for the month despite increasing prices for used vehicles (+1.6%), apparel (+1.1%), medical care (+0.4%), and shelter (+0.3%), along with a +6.1% increase in gardening and lawncare services that pushed household operations prices up +2.8%. The core price index, which removes the volatile food and energy components, was up +0.3% for the month, bringing core yearly inflation up by +0.1% to +2.1%. On a yearly basis, prices were up for shelter (+3.5%), food away from home (+3.1%), and medical care services (+2.8%), but fell for energy (-3.4%), medical care commodities (-1.5%), and apparel (-1.3%).

The drop in energy prices in June also lowered producer prices, with a -3.1% monthly drop offsetting a +0.6% increase in food prices and bringing overall producer goods prices down ‑0.4% for the month. Producer service prices were up +0.4% for the month, with a +1.3% gain in trade prices and a +0.3% gain in transportation and warehousing costs, and the gain in service prices edged past the drop in goods prices to bring overall producer prices up +0.1% for the month. On a yearly basis, overall producer prices gained +1.7%, a drop from May’s +1.8% increase. Core producer prices, which remove the effects of food, energy and trade prices, were +2.1% higher on a yearly basis, slowing from May’s +2.3% rate.