Inflation Hits New Six-Year High, Despite Marginally Missing Estimates

U.S. CPI is the headline data release this week and it comes on the heels of the weaker-than-expected AHE print that accompanied the June jobs report on Friday.

It will also be viewed in the context of the June Fed minutes which betrayed a committee that, while characterizing the U.S. economy as “very strong” and while expressing concern about the prospect of overheating in light of fiscal stimulus, also described the trade tensions as “intensifying.”

Remember, the Fed is undoubtedly concerned about the prospect of late cycle fiscal stimulus raising the chances that the Phillips curve comes back to life as it’s wont to do in late stage expansions.

“Phillips curve functions like an organ without a body, an equivalent of Cheshire cat’s smile (in Alice in Wonderland) that persists alone, even when the cat’s body is no longer present”, Deutsche Bank’s Aleksandar Kocic wrote last month, in a characteristically brilliant note.


What you’re looking at there are the vertical lines at the end of recoveries. As Kocic goes on to write, “in the past, this stage always exhibited a dramatic (practically straight line) rise in wages in response to infinitesimal improvements in economic activity.”

When you throw in the possibility that tariffs have a steepening effect on the Phillips curve, you’re left to ponder whether the FOMC will be loath to forestall further rate hikes irrespective of what happens to markets over the remainder of the year.

In the same vein, the Fed is said to be actively discussing an outcome that sees protectionism driving up the cost of tradable goods.

“After experiencing unexpected weakness last year, consumer price inflation has picked up in 2018, increasing 1.0% through the first five months of the year [and] we expect more of the same in June, projecting both core and headline CPI to have increased by 0.2% m/m, which should push the former up 0.1pp to 2.3% year-on-year and the latter up 0.1pp to 2.9% year-on-year,” BNP writes, in their week ahead outlook.



Inflation jumped to a six-year high in May.

So that’s the backdrop for the June print and without further ado.

Estimates and priors

  • US CPI MoM, est. 0.2%, prior 0.2%
  • 8:30am: US CPI Ex Food and Energy MoM, est. 0.2%, prior 0.2%
  • 8:30am: US CPI YoY, est. 2.9%, prior 2.8%
  • 8:30am: US CPI Ex Food and Energy YoY, est. 2.3%, prior 2.2%
  • 8:30am: US CPI Index NSA, est. 252.1, prior 251.6
  • 8:30am: US CPI Core Index SA, est. 257.4, prior 256.9


  • CPI rose 0.1% vs est. 0.2%, according to the BLS.
  • CPI Y/y rose 2.9%; est. 2.9%


  • Forecast range from up 0.1% to up 0.5% from 67 estimates
  •  Ex. food, energy m/m up 0.162%; est. 0.2%
  • Ex. food, energy y/y up 2.255%; est. 2.3%

The good news here is that if you’re looking to take a vacation, hotel prices collapsed 4.1% MoM, that would be the largest decline on record and as Bloomberg notes, it pushed the broader gauge down by 0.037ppt despite “continued steady gains” in other measures of housing costs.

There’s nothing in here that’s going to change the Fed’s mind one way or another, so I guess, at the margin, you can ignore this one and get back to worrying about what the President is going to do next.

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