CPI And PCE Inflation Forecasts Strongly Hint Fed Interest Rate Hikes

The Next CPI and PCE reports are July 14 and 30 respectively. What’s ahead?

The CPI and PCE projections are from the Cleveland Fed Inflation Nowcast.

Year-Over-Year Nowcast June

• CPI: 3.92 percent

• Core CPI: 2.85 percent

• PCE: 3.88 percent

• Core PCE:3.43 percent

Year-Over-Year Nowcast July

• CPI: 3.71 percent

• Core CPI: 2.81 percent

• PCE: 3.84 percent

• Core PCE:3.47 percent

These are uninspiring numbers to say the least.

Notable, core PCE forecasts are still rising, and that’s the Fed’s preferred measure of inflation.

Core measures exclude food and energy.

CPI and PCE Month-Over-Month Percent Change Plus Nowcast

Month-Over-Month Nowcast June

• CPI: -0.06 percent

• Core CPI: 0.23 percent

• PCE: 0.10 percent

• Core PCE: 0.28 percent

Month-Over-Month Nowcast July

• CPI: 0.00 percent

• Core CPI: 0.23 percent

• PCE: 0.11 percent

• Core PCE: 0.28 percent

Core Projections Problematic

• 0.23% monthly annualizes to roughly 2.80% per year.

• 0.28% monthly annualizes to roughly 3.41% per year.

Those who like to exclude food and energy are now stuck in their own trap.

Energy rates to be a big drag on the month-over-month measures in June and July.

However, the core numbers the Fed likes to use, especially PCE remain stubbornly high.

Looking ahead to October, there is now 79 percent chance of at least one hike with a 33 percent chance of multiple hikes.

Iran Not Helping

Trump’s latest maneuver in Iran does not help at all.

West Texas Intermediate and Brent oil prices are up over three percent to $73.81 and $78.50 as I type.

The long bond yield is up slightly to 5.085 percent.

Iran understands the setup more than Trump.

I said at the outset of the war that Iran’s number one goal was to punish Trump as much as possible with no regard to the damage it would suffer doing so.

That has been an accurate assessment, and one that Trump fails to understand.

Yet, Trump boasts today about winning and still says the US controls the strait. This weekend, traffic came to a near standstill again.

We call this winning. … By Iran.

Hooray! We Have a New Stated Goal in Iran.

Please note Hooray! We Have a New Stated Goal in Iran. Guess the Goal.

Victory is now defined as starting a war to get back to where things were before we started the war.

Is that brilliant or what?

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