#USCoreCPIMissesExpectations

Core CPI 2.7% YoY vs 2.8% Expected, Headline Turns Negative

Core CPI: +2.7% YoY in June, below 2.8% consensus, down from 2.9% in May
Headline CPI: -0.1% MoM, first negative print since May 2020. Annual: 3.8% vs 4.2% prior
Fed Impact: July hike odds eased from ∼50%, Treasury yields dipped

The Breakdown
Energy prices drove the headline drop, with gasoline down sharply. But core services stayed sticky — housing and auto insurance costs remain elevated, keeping core inflation well above the Fed’s 2% target.

Market Reaction
Traders quickly repriced Fed odds lower for July after the miss. The debate now shifts to the rate-cut timeline: one month of cool data isn’t enough for the Fed, especially with core PCE still projected at 3.34% and Middle East oil risks lingering.

Bottom Line
Progress on disinflation, but sticky services mean the Fed won’t declare victory. Warsh: “no tolerance” for persistent inflation. Waller: need “several months” of cooler data.

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