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Why MNI
MNI is the leading provider
of intelligence and analysis on the Global Fixed Income, Foreign Exchange and Energy markets. We use an innovative combination of real-time analysis, deep fundamental research and journalism to provide unique and actionable insights for traders and investors. Our "All signal, no noise" approach drives an intelligence service that is succinct and timely, which is highly regarded by our time constrained client base.Our Head Office is in London with offices in Chicago, Washington and Beijing, as well as an on the ground presence in other major financial centres across the world.
US DATA
- The June CPI report continued a trend of an aggressive reversal of Q1’s surprise strength, ramping up expectations that the July FOMC is used as a launching pad for a September cut (the latter now essentially fully priced).
- Most recently, core CPI was 0.065% M/M in June (vs average estimates of 0.21%) after 0.16% in May, and supercore CPI printed -0.05% M/M (vs an average 0.27 and a range of 0.15-04) after -0.04%.
- Whilst the Fed has put focus on supercore in recent years, we feel that the latest CPI housing data were even more notable as a sign of the long-awaited final housing shoe to drop.
- OER at 0.28% M/M was a full 0.1pp lower than an average of estimates we’d seen beforehand and with a similar story for tenants’ rents at 0.26% M/M – both are below average rates through 2019. After methodological quirks have seen prior strength in OER correctly questioned, the fact tenants’ rents also stepped lower adds weight.
- Stepping back to look in trend terms, core CPI increased just 2.1% annualized in the three months to June or 3.3% over six months. Supercore’s volatility is evident in recent trends though, at 1.4% over three months vs 4.8% over six months.
- We wait on latest PCE implications, including after tomorrow’s PPI report, but with PCE metrics typically running softer, the latest data are looking increasingly favorable for the Fed against a backdrop of the unemployment rate in June pushing above the FOMC’s end-2024 forecast.
- Whilst the FOMC rarely likes to surprise and seems more likely to use July to tee up a subsequent cut, there is still a lot of data to be seen before the Sep 18 meeting, including July and August payrolls and CPI reports.
- Should these reports continue the recent dovish theme there’s even a chance that a 50bp cut in September sees growing attention, but this can very quickly fade in the event of hawkish surprises as the Fed still looks for a number of months of good inflation data to have the confidence to cut.
- To be specific, we suspect we’d need to see another sequentially lower core CPI print along with a softening in payrolls growth and/or another shift higher in the unemployment rate for a 50bp cut to really get floated, but there is a path there which we wouldn’t have had said just 10 days ago.
Why MNI
MNI is the leading provider
of intelligence and analysis on the Global Fixed Income, Foreign Exchange and Energy markets. We use an innovative combination of real-time analysis, deep fundamental research and journalism to provide unique and actionable insights for traders and investors. Our "All signal, no noise" approach drives an intelligence service that is succinct and timely, which is highly regarded by our time constrained client base.Our Head Office is in London with offices in Chicago, Washington and Beijing, as well as an on the ground presence in other major financial centres across the world.
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