Wells Fargo: Eyeing Any Concern Over Economic Deceleration

Wells Fargo changed its core July FOMC hiking call to 100bp following the June CPI release, though a combination of Fed speakers/data since then has seen them acknowledge an increased probability of a hike of "only" 75bp.

• For the meeting itself, Wells Fargo's preview says the July statement and Powell's press conference will likely continue to express concern over inflation - the question is whether there is any reference to recent signs of economic deceleration - "If so, then the Committee may be signaling that a slower pace of policy tightening may be appropriate in coming meetings."
• The Fed's probably not going to feel relief simply from a likely near-term pullback in headline inflation, and will need to see a series of slower monthly core readings before pulling back the hiking throttle.
• But Wells Fargo thinks that since rent costs lag general housing conditions, "the Fed may narrow in even further to core-ex-shelter inflation if private sector measures of housing costs show softening prices that will take a few quarters to appear in the official inflation measures."