Skip links

Inside Markets — Inflation


August 11, 2023

Cooler-than-expected June CPI and PPI from July made disinflation a major part of the consensus narrative. But as discussed earlier in the week, base effects have gone from a disinflation tailwind to a headwind, and the recent rise in commodity prices will likely put near-term upward pressure on MoM headline inflation. The good news is the shelter component of CPI should soon begin to rollover and offset some of the inflation coming from these other factors.

Yesterday’s July CPI report was largely billed as an inline print, but the core rate of +0.2% (+0.16% unrounded) was a second consecutive softer-than-expected month. While the window is too narrow to declare a new trend, it’s important to note the annualized core rate combining June and July was only +1.9% vs. the trailing 12-month statistic of +4.7%. We think this cooling of inflation keeps the Fed on hold at the September 20 meeting, while a weaker August payroll (9/1) number and further cooling in August CPI (9/13) could lead to an announced end of the hiking cycle.

Read more