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US DATA: Surprise Rents Strength A Stumbling Block For 50bp Cut Arguments

US DATA
  • Core CPI inflation was a touch softer than expected in July at 0.165% M/M (cons 0.2 with a slight tilt lower) but the details were arguably stronger. 
  • All told, this is a CPI report that offered further broad disinflationary pressures, with core CPI slowing a tenth to 3.17% Y/Y for a new low since Apr 2021 and the six-month rate rate dipping 0.5pps to 2.85% annualized for its first month below the Y/Y in six months. 
  • However, the re-acceleration in rents, barring any quirks behind their measures, shouldn’t give the Fed greater confidence that inflation is moving sustainably toward 2%. We don’t see this report warranting a 50bp cut in September but the ultimate test is going to be next month’s payrolls report, with further dovish unemployment rate surprises or at least another 4.3% print and additional CPI softness needed to justify a 50bp move. 

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