From ZeroHedge, skipping past the introduction to their analyst roundup:
....Last but not least, as we discussed earlier, BofA repeats that today’s report is consistent with the bank's fresh view that the “inflation tax” will weigh on consumer spending, driving the economy into a mild recession (how that wasn't obvious say a week or a month ago, when anyone with half a frontal lobe could see it, remains a mystery).
Bank of America aside, this is what some other pundits and Wall Street thinkers said in response:
- Jan Hatzius, chief economist at Goldman Sachs: "The year-on-year rate nonetheless fell one tenth to 5.9% as last June’s surge in used car prices dropped out of the calculation. The breadth of core inflation increased further, with 6-month annualized inflation now above 6% for 42% of the basket. Shelter categories surprisingly accelerated further (rent +0.78%, owners’ equivalent rent +0.70%). And car insurance (+1.9%), recreation admissions (+1.7%), and day care (+0.7%) also contributed to 31-year high in core services inflation (+0.70%). Also of note, the labor-intensive “food away from home” category rose at a 41-year high pace (+0.95%), in part reflecting a rebound in “Food at Employee Sites and Schools” as firms phase out free-meal programs (+24.2% mom, but still -43.2% since February 2020). Core goods prices were generally strong as well, including for autos (new +0.7%, used +1.6%, parts +0.4%), apparel (+0.8%), and tobacco (+0.6%). On the negative side, travel categories pulled back somewhat after surging in the spring (airfares -1.8%, hotel lodging -2.8%). Headline CPI rose 1.32%, 0.22pp above consensus, on higher energy (+7.5%) and food (+1.0%) prices. The 36-year-high rent reading poses upside risk to the path of the funds rate in the second half of the year, as shelter is one of the largest and most persistent inflation categories."
- Ellen Zentner, chief economist at Morgan Stanley: “After May’s upside surprise across all major categories, this report is the second in a row that shows inflation pressures continuing on a broad basis.” But: “The outlook points to some inflation deceleration from here. In particular, energy price inflation is likely to reverse sharply in July on the back of falling commodity and retail gas prices, which points to a substantial drop-off in sequential headline inflation next month.”
- Katherine Judge, economist at CIBC Capital Markets, doesn’t hold out much hope for better news on core inflation soon: “Although gasoline prices have fallen into July, suggesting an easing in headline inflation ahead, core annual inflation could accelerate ahead as base effects will no longer be biasing that measure down, while higher shelter prices will continue to feed through to that index.”
- Neil Dutta, economist at Renaissance Macro:“Given my reading of the Fed’s reaction function, the odds of recession are going up and the likelihood of a pivot is going down given today’s CPI inflation data.”
- Ian Lyngen, rates strategist at BMO Capital markets says 100bps in July is not “our base case,” but watch out after the surprise shift in June. “We were surprised in June with the upsized hike so are waiting on any incoming Fedspeak to clarify the Committee’s thinking on the pace of tightening.”
- Quincy Krosby, chief equity strategist at LPL Financial, says the climb over 9% caught the market off guard: “This week’s University of Michigan’s preliminary consumer sentiment index release, and particularly its consumer 5-year inflation expectations results, becomes even more crucial for markets, not to mention the Fed.”
- Jay Hatfield, CEO at Infrastructure Capital Advisors, says this may signal the peak. “We forecast that this print will mark the peak of inflation as the Fed’s 15% shrinkage of the monetary base, which is the fastest decline since the great depression, will curb inflation as the QT has caused the dollar to appreciate by over 12% this year which has caused commodities to plummet by over 20% since the measurement period for June CPI.”
- Jason Furman, the Obama economic official who criticized last year’s $1.9 trillion spending plan, has come out in favor of the revised economic agenda, which features about a trillion dollars in revenue gains to fund half a trillion of deficit reduction with much of the rest going to cut drug costs. Furman tweets: “At this point fiscal policy should help too, the best option on the table being ~$500b of deficit reduction & Rx price slowing through reconciliation.”
- Paul Krugman, the person who said the fax machine would be more valuable than the internet, tows the White House party line and says that "today’s hot inflation number is already out of date, not reflecting falling gasoline prices and other factors that have recently gone into reverse. But hard to imagine that the Fed won’t hike by 75 anyway." What is hilarious, and apparently too difficult for brilliant minds like Krugman to comprehend is that the moment the market prices in the Fed pivot due to too much inflation, commodity prices will explode higher, sending inflation even higher.
- David Kelly, global strategist at JPMorgan Asset Management, says that "this is a very unusual economy and I hope the Federal Reserve recognizes that. This is a very hot report but I think this is the last hot month in inflation heatwave.”....
....MUCH MORE
A lot of the same people who didn't see inflation coming (or did and lied about what they saw, for their own reason) are now saying "Well that's the peak" (although some of those were also saying 'that's the peak' after the January print, 7.5% and after the March print, 8.5% and....
So what now? A two percentage point drop would be huge. Getting us down to, ermm...7.1%.
Maybe a three percentage point decline!!!
And we'd be at, ah, slide rule time, ah....6.1%.
Never mind.
From Trading Economics (also on blogroll at right):
source: tradingeconomics.com
