Wednesday, July 12, 2023

Inflation Report: Analysts React

Skipping past the introduction.

Via ZeroHedge:

....As such as Bloomberg chief economist Anna Wong writes, the weak core CPI reading for June "is likely the start of a string of readings over the next few months that will show annualized core inflation running close to the Fed’s 2% target" and while the Fed is all but certain to hike by 25 basis points in July, the favorable CPI report will bolster voices on the FOMC arguing that July’s hike should be the final one.

Below we recap several other kneejerk reactions from Wall Street strategists and traders.

Here is Neil Birrell, CIO at Premier Miton Investors:

Beyond the next meeting, matters are less clear and the chances of the Fed pulling off what many thought was impossible are rising; growth is robust and inflation is falling.

Andrew Hunter at Capital Economics:

The muted 0.2% m/m rise in core consumer prices in June won’t stop the Fed from hiking rates again later this month, but it supports our view that the downward trend in core inflation is set to accelerate over the second half of the year.

Jay Hatfield, CEO of Infrastructure Capital Advisors:

This CPI release demonstrates that inflation is rapidly declining, with PPI likely to come in close to zero on a year over year basis. And while the Fed will commit yet another policy error by raising rates in July, it will likely pause in September as inflation data continues to decline and the economy decelerates.

Megan Horneman, CIO at Verdence Capital Advisors:

Even if this print came in softer than expected, it’s not still not enough for the Fed to say their job is done. I don’t think they are going to be cutting... The market is too optimistic about the path and timing on rate cuts. We think they are going to stay higher for longer, they told us that.

David Russell, Vice President of Market Intelligence at TradeStation

This report suggests that inflation is easing as the optimists hoped, with shelter costs following the bulls’ script. It’s now easier to anticipate further improvements because of its lagging nature. Other categories like transportation and used-car prices bolster arguments for the Fed pausing soon. This is no longer just a commodity-driven story. Slowly but surely the tsunami of inflation is receding. With the Fed’s target rate now more than 200 basis points above headline CPI, investors might think yields have indeed peaked.

Rubeela Farooqi, chief US economist at High Frequency Economics:

The three parts of inflation Chair Powell has highlighted, core goods, core services, and core services ex-shelter all slowed to end the second quarter. While inflation remains elevated, the deceleration will be welcome news to policymakers. But these data are not likely to change the outcome of the July meeting, with a 25-bps rate hike most likely. As for the future path of policy, incoming information on inflation, the labor market as well as considerations about credit conditions will determine whether the FOMC is done raising rates or if more tightening is needed. Based on our current assessment of inflation and the labor market, after hiking in July, we think the FOMC is likely to maintain rates at 5.4%, through year-end.....