On June CPI: Sticky Inflation Just Came Unstuck

Headline CPI at 2.97% brings inflation 93% of the way back to the Fed’s target from its peak one year ago. Core at 4.83% sharply beat expectations. Without OER, core is at 3.18%. 3-month and 1-month inflation are at even lower rates, so this is more than just bad data from a year ago rolling off. We reiterate our call that the July FOMC will pause again, an upside impeller for the economy, stocks and bonds (especially the short end). The rationale for the June pause was to await information – but information could have been gathered anyway, so that decision represented the Fed’s concern that they may have already done enough or too much. Now, with this information, why would they hike in July if they had reason to pause in June? PCE data won’t come out until after the FOMC, but they may have early access to it. The best CPI proxy for Powell’s favorite PCE measure is at the best level in 14 months, and sharply decelerating.