by Chris Black
Today, we saw June headline CPI tumble to 3% YoY (year-over-year), down from 4% in May (https://t.me/marketfeed/416509) and 4.9% in April (https://t.me/marketfeed/404852).
Could June, at 3%, be the inflation floor, where June of last year at 9.1% was the inflation peak?
BofA notes that, unless the MoM (month-over-month; change per month) CPI prints to below 0.2% very soon, current MoM CPI trends suggest today’s June CPI will set the low for 2023, and we go back to 4% or higher by the end of the year.
A surge in commodity (oil) prices (https://t.me/marketfeed/423973) from here as China stimulates could be one inflationary trigger.
Consider the UK, which is seeing a resurgence in core CPI as their headline CPI ominously flatlines (https://t.me/marketfeed/419158) (chart on the right).
In response, they are returning to 50 bp rate hikes (https://t.me/DissidentThoughts/2488).
The difference (https://www.wallstreetmojo.com/headline-inflation/#:~:text=What%20is%20the%20difference%20between,commodities%2C%20services%2C%20and%20goods) between core CPI and headline CPI is the selected basket of goods & services measured: core CPI will omit the components that tend to exhibit more volatile price movements (i.e. energy).
The Fed prefers to cite core inflation and, specifically, the core PCE (https://twitter.com/NickTimiraos/status/1585956843981094913).
(Bank of America paper (https://t.me/DTpapers/102))