Deutsche Bank analysts note that the US CPI report was soft with the +0.11% mom core print below expectations for +0.2% and in the process lowered the annual rate to +2.0% yoy, while the 3-month and 6-month readings also dropped to +1.6% and +1.9% respectively.
“The trimmed mean measure, which excludes outliers and had been cited by Powell as evidence that soft inflation has been transitory, also slid to 0.11% mom, its weakest reading in two years. So the weaker momentum is clearly significant and makes it harder for the Fed to pass off the misses as solely transitory.”
“The softness was centred around transportation and recreation and the read through suggests further downside for the core PCE reading also.”
“The other US data was the monthly budget statement, which showed a monthly deficit of -$207.8bn, which was actually the widest-ever May deficit reading in dollar terms on record. So far this fiscal year, the US budget is on track for its widest deficit since 2011.”