CIBC Research discusses its reaction to today's US CPI report for the month of June.
"Will Fed Powell look past a 0.3% core CPI in June, which matched CIBC's forecast, but was above virtually unanimous expectations for a tick or two lower? Probably. The headline increase of 0.1% was also above consensus, but has the overall CPI standing at 1.6% (vs 1.8% the prior month), while core CPI's uptick to 2.1% (from 2.0%) will still have the Fed's preferred measured, the core PCE index, running a few ticks below the 2% target.
While the Fed has spoken about the risks of a more persistent downside miss to its inflation target as a reason to ease, we believe those risks are tied to their worry that a sustained growth slump is coming, and doesn't rest as much on the existing gap between inflation and the 2% target," CIBC notes.
"As a result, Powell's fairly clear leaning to cutting rates now (from yesterday's testimony) still signals a quarter point cut this month, with today's firmer core reading just one more reason why a 50 bp cut in July is much more unlikely," CIBC adds.