We believe that July’s headline CPI number will decline sequentially from June’s 9.1% print given that the price of oil has fallen back. However, we expect CPI excluding Energy to increase sequentially driven by food and shelter.
It would be a mistake for the Fed to only move by 75 bps during the July 26-27 FOMC meeting as they are so far behind the inflation curve. We won’t see a 2% CPI this decade.
The Fed’s guidepost – the 2-year Treasury – is at 3.23%. The Fed ought to at least have its Fed Funds Rate in-line with the 2-year at the present time.
Our view is that it may take a new Administration with a newly elected Fed Chair to wrangle inflation. This Fed has already blinked.