Soft U.S. June CPI Erodes Odds of a July Fed Rate Hike
AI Market Summary
U.S. June core CPI printed softer than expected (0% m/m; 2.6% y/y), reversing the hawkish impulse from Governor Waller and sharply lowering market-implied odds of a July hike to roughly 15%. The data raises the bar for near-term Fed tightening and supports looser financial conditions. Risks remain skewed to energy-driven inflation if Middle East tensions lift oil prices, but absent that, rates are likely to stay steady.
Impact level
● High
Affected assets
NCSIDXY2USD/USDT-0.43%
AI Insight · NCSIDXY2USD/USDTAI Insight
▲ Bullish
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Huoxing Finance reported that analyst Justin McQueen said the latest U.S. inflation figures have pushed markets toward a more dovish view of the Federal Reserve. Fed Governor Christopher Waller struck a hawkish tone on Monday, arguing that additional rate hikes could be warranted in the near term if core CPI stayed firm.
Tuesday's June CPI release pointed in the opposite direction. Core CPI was flat at 0% month over month, undershooting the market's 0.2% forecast, while the year-over-year core measure rose 2.6%, also below expectations. McQueen said the report materially reduces the near-term pressure for the Fed to tighten again.
Market pricing has adjusted quickly. The implied probability of a July hike has slid to about 15%, close to levels seen before Waller's remarks, signaling investors have largely priced out a July increase.
McQueen added that while further tightening later this year remains possible, the threshold for another hike has clearly risen. Unless escalating Middle East tensions disrupt energy supplies and drive a sharp jump in oil prices that reignites inflation, the Fed is more likely to keep policy rates unchanged in the near term.
