Better Than Feared
August 12, 2025
The July CPI report falls into the ‘better-than-feared’ category with the headline and core rate in line with consensus at +0.2% and +0.3% MoM, respectively. However, the annualized core rate came in higher at +3.1% vs. consensus for 3% and ‘super-core’ CPI (services ex-shelter) rose at its fastest pace since January at +0.55% MoM. The report keeps the Fed on track for a September rate cut, with market-based probability rising to ~96%. OIS markets are also priced for ~60bp of cuts in 2025.
Earnings expectations are the biggest driver of stock prices, with recent upside driven by stronger-than-expected earnings growth; it’s that simple. Going into Q1’25, consensus was looking for ~7% YoY EPS growth and go ~12%. Expectations for Q2 earnings growth were for ~4% YoY at the start of the quarter and that number now looks more like 11%.
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