Soft June CPI Pulls Back Expectations for a Fed Rate Hike in July

BlockBeats reported on July 14 that analyst Justin McQueen said the latest U.S. inflation figures have shifted the rate outlook in a more dovish direction. While Fed Governor Christopher Waller struck a hawkish tone on Monday, arguing that firm core CPI readings could justify near-term tightening, Tuesday's June CPI release undercut that case. Core CPI was flat month over month in June, missing the market consensus for a 0.2% rise. The year-over-year core reading came in at 2.6%, also below expectations. McQueen said the data meaningfully reduces the urgency for the Federal Reserve to lift rates in the near term. Markets have responded by dialing back the odds of a July move. Pricing now implies roughly a 15% chance of a hike, close to levels seen before Waller's comments, suggesting investors have largely taken a July increase off the table. The softer print does not rule out additional tightening later this year, but it raises the threshold for another hike. McQueen added that unless the Middle East situation worsens enough to disrupt energy supplies, drive oil sharply higher, and rekindle inflation pressures, the Fed is more likely to keep policy rates unchanged in the period ahead.