CIBC Research discusses its reaction to today's US CPI print for the month of July.
"US CPI inflation is over the hump and while core inflation is still too hot, the negative surprise will likely provide some relief for the Fed. Total CPI stalled in July with no month-over-month increase, leading the annual rate to decelerate 6 ticks to 8.5%, below consensus expectations of 8.7%. The slowdown in gasoline prices was offset by increases in food and shelter prices. Core inflation maintained some of its momentum to post a 0.3% advance on the month (vs 0.5% consensus). Shelter prices were once again a major contributor as rent and owners’ equivalent rent, which together represent a huge share of core CPI, continued to climb. Meanwhile, airfare, used cars, communication and apparel prices all declined on the month," CIBC notes.
"Overall, the annual rate for core inflation remained at 5.9%, below consensus expectations of 6.1%. While this release was better news than anticipated, given the strong payroll numbers and the momentum in core inflation, the Fed should still be on track for a 50 bps increase at its next meeting," CIBC adds.