VIEW: J.P.Morgan Pencil In July Re-Centering By The MAS

J.P.Morgan note that “the May CPI reading combined with expectations of elevated upstream price pressures interacting with declining domestic slack underlies our forecast that core CPI will remain elevated through much of this year, with some sequential easing only in Q422. The interaction between elevated supply side prices amid sticky labor costs raises the risk of a wage/price spiral. Thus, in our view, a front-loaded policy stance would better serve to anchor inflation setting behavior than later. Thus, we now expect a re-centering of the NEER in July as a baseline, likely after the June CPI reading on July 25, while not ruling out a possibility of a steepening in the NEER slope”