MNI U.S. Weekly Macro Wrap: CPI Miss Sees Fed Cut Expectations Pulled Forward

Executive Summary

• CPI inflation came in much softer than expected in June, with monthly headline the lowest since the start of the pandemic in 2020, core at just 0.065% M/M and a second month of deflation for “supercore”.
• PPI followed with stronger than expected core readings on balance, but with some net dovish implications in a possible sign of reduced pricing power and with likely less hawkish core PCE read-through.
• Inflation expectations also softened although latest weekly jobless claims data offered a slight bucking to what’s been a sizeable trend higher in recent months.
• Building on June’s further increase in the unemployment rate, the magnitude and composition of the CPI miss has seen implied Fed rates drop. A 25bp cut is fully priced for September and it’s a coin toss between two and three cuts by year-end vs the single 25bp cut per the median 2024 FOMC dot at the June SEP.
• Fed’s Powell is in firm focus on Monday for his final appearance before the July FOMC blackout.

PLEASE FIND THE FULL REPORT HERE:

US week in macro_240712.pdf