July CPI report was out yesterday. Headline CPI MoM rose 0.2% in July vs. -0.1% in June, 0% in May and 0.3% in April while the core CPI MoM rose 0.2% in July vs. 0.1% in June, 0.2% in May and 0.3% in April. Headline CPI YoY rose 2.9% in July vs. 3% in June, 3.3% in May, 3.4% in April, 3.5% in March, 3.2% in February, 3.1% in January, 3.4% in December, 3.1% in November, 3.2% in October, 3.7% in September, 3.7% in August 2023. Core CPI YoY rose 3.2% in July vs. 3.3% in June, 3.4% in May vs. 3.6% in April, 3.8% in March, 3.8% in February, 3.9% in January, 3.9% in December, 4% in November, 4% in October, 4.1% in September, 4.2% in August, 4.7% in July 2023, 4.8% in June 2023, 5.3% in May 2023, 5.5% in April 2023 and 5.6% in March 2023.
This is the first time the YoY headline CPI is below 3% since April 2021. The Core CPI also continued to fall. Chances are the Fed is going to start cutting rates in September. Some people say the Fed should cut 50 basis points to avoid a hard landing. I doubt the Fed will do that. It’s too close to the election for the Fed to do anything drastic as they try to stay non-partisan. My prediction is they will do a low-drama 25-basis point cut in September and we will see what happens after the election.
