Josh Nye, senior economist at Royal Bank of Canada, notes that the US headline CPI dipped to 1.6% y/y in June while core CPI ticked up to 2.1% y/y (consensus 2.0%).
Key Quotes
“If last Friday’s strong payroll report and a pause in the US-China trade war post-G20 didn’t change the Fed’s thinking on a July cut, we doubt today’s modest upside surprise on core inflation will do the job.”
“This marks the 16th consecutive month of core CPI at or above 2%, but softer core PCE inflation (favoured by the Fed) still had Powell saying, “inflation pressures remain muted” yesterday.”
“The fact that PCE inflation has consistently undershot the Fed’s 2% objective allows the central bank that flexibility, and today’s slightly firmer CPI report won’t change its calculus.”
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