Scotia And RBC Eye Mixed Signs Of Inflation Peaking

Scotia: Given strong annualized June inflation figures (+17.1% M/M headline, +8.8% M/M core), "we cannot say that inflation momentum is peaking in the US".

• The Fed "will likely take this as evidence that we have not reached an inflation peak and will probably deliver another 75bps hike on July 27".
• "Inflation is not just about food and energy" - though Y/Y core goods prices are ebbing, core services are accelerating, which "reflects the rotation of the composition of spending away from goods earlier in the pandemic toward re-engaging with hot demand for a variety of services."
• June's CPI reading probably points to 0.4% M/M core PCE, a second monthly acceleration since April.

RBC: While the June report showed "price pressures remained extremely broad", "further accelerations in CPI should be increasingly hard to come by."

• Commodity prices have "turned a corner" since June, rising auto production should help alleviate car price pressures, and global supply chain constraints have been easing persistently.
• But countering inflation headwinds are higher rent prices which should continue to put a floor under inflation readings in the near term.
• The Fed "will act as forcefully as needed" to accelerate the process of getting inflation back down to target, which will include another 75bp hike in July.