What does the US inflation figure mean?

US inflation in June: core index at its lowest since 2021. Facts, numbers and scenarios on rates and beyond. The comment of Antonio Cesarano, chief global strategist of Intermonte

June US inflation lower than expected especially for the core component, where the index reaches 4.8% (the minimum since 2021), and 4% in supercore terms (ie also net of the rental component).

70% of the monthly increase is still attributable to the rental component which is slowly trying to settle down, as shown by the graph of the y/y data.

As expected, the prices of used cars and trucks are down (-0.5% m/m), while airfares are also down (-8.1% m/m). Surprising given that we are in the height of the holiday travel season.

Average weekly real incomes are back in positive territory for the first time since April 2021.

IN SUMMARY

Today's data should not call into question the 25bp rise in July, while doubts remain about the need for a further rise in September.

The news is positive for consumption, which could lead the Fed to try to use all the technicalities of the case (for example the reverse repo rate and other), in order to be able to work more on the drop in liquidity and less on rates, thus keeping consumption under control and ensuring a declining trend in inflation.

The data confirms the possibility that market rates may have reached their peak, with a possible consequent continuation of the curve inversion trend.

From an operational point of view, government rates are currently attractive, trying to work on the extremes of the curve to take advantage of the good risk/return ratio of the short-term sector and the potential capital gains of the part within 10 years

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This is a machine translation from Italian language of a post published on Start Magazine at the URL https://www.startmag.it/economia/inflazione-stati-uniti-giugno-2023/ on Thu, 13 Jul 2023 05:45:15 +0000.