US July CPI came in at 0% m/m, ICYMI:

This via Scotia:

  • Core CPI was up by just 0.3% m/m which was softer than expected and ends or at least suspends a string of firmer readings that often surprised higher
  • Headline CPI was weaker than expected partly because of core but also because gasoline prices fell by more than anticipated in seasonally adjusted terms (-7.7% m/m).
  • it’s premature to judge whether the Fed’s next move in September will be a 50 or 75 point hike given that we’ll get one more PCE reading which is the Fed’s preferred measure, one more CPI print and another jobs report before then plus the fact that September often carries its own surprises along the way.
  • At this point, I think a reasonable perspective would lean heavily against the view that one softish CPI print would dissuade the Fed’s hawks. They may trade-off the one CPI downside surprise against the ongoing tightening in the US job market and concern that wage pressures present the risk of more persistent inflation. In any event, I continue to think we’re dealing with longer wave forces and it’s silly to think one inflation reading settles anything.

I usually post these sorts of analyses with no comment, leaving it up to you traders to decide. But, FWIW, I agree with Scotia here. this is not to take away from the party on risk markets we saw. A rethink will come though.


I posted earlier in the week on the PCE inflation measure to come (along with another CPI and NFP also):

CPI y/y: