Daily Market Color

CPI Set to Decelerate Again?

Rates little changed ahead of CPI data. Swap rates and Treasury yields were mixed across a flattening curve today, the 2-year UST yield rising 2bps to 4.87% and the 10-year yield falling 2bps to 3.97%. The move came ahead of tomorrow’s CPI data, which is expected to show a continued deceleration in inflation. While a weak print will likely have little impact on July’s Fed meeting, we could see quite a bit of movement thereafter. Currently, the market anticipates that July’s rate hike will be the Fed’s last of this cycle.

Previewing CPI. Tomorrow’s slate will be headlined by CPI data, where the headline YoY figure is expected to drop to 3.1% in June from 4% in May. The decrease would mark the 12th consecutive month of declines from the peak of 9.1% in June 2022 and would be the lowest level seen since March 2021. Core YoY CPI is expected to come in at 5% from 5.3%, while both the headline and core MoM figures are expected to be 0.3%.

Day ahead. CPI data will be released at 8:30 AM. Multiple Fed members will make public comments later in the session, including voter Neel Kashkari and non-voters Raphael Bostic and Loretta Mester.

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