On Thursday, July 11, the US Department of Labor released data showing that US CPI in June was 3% year-on-year, slightly lower than expected 3.1%, further down from the previous value of 3.3%, a 0.1% month-on-month decrease, expected 0.1%, and the first negative growth since May 2020 with a previous value of 0%.
In June, core CPI (excluding volatile energy and food) rose by 3.3% year-on-year, lower than the expected 3.4% and the previous value of 3.4%, the lowest level since April 2021; it rose by 0.1% month-on-month, and both the expected value and the previous value were 0.2%, the smallest increase since August 2021.
The highly anticipated super inflation indicator (core service CPI excluding housing) rose by 0.1% month-on-month, but the year-on-year increase fell below 5.0%.
After the data was released, the three major futures indexes of US stocks rose sharply, US bond yields quickly fell, and the 10-year Treasury bond yields fell by nearly 10 basis points; the USD index extended its decline.
Will there be three rate cuts this year?
It is worth noting that this is the third consecutive CPI that is lower than Wall Street's expectations, and the expectations of a rate cut in July have resurfaced, with the annualized inflation rates for three and six months showing a decline.
However, the probability of a rate cut in July is still very low.
At the same time, derivative traders raised the probability of the Fed's rate cut from September to 80% or more, from around 70% before the data was released. For the full year of 2024, the implied rate cut is 57 basis points, which means there will be at least two rate cuts of 25 basis points; previously it was about 49 basis points.
"The prerequisite for starting a rate cut in September and issuing a series of signals for subsequent rate cuts is now in place," said Ed Al-Hussainy, an interest rate strategist at Columbia Threadneedle Investment.
Traders expect a 25% chance of the Fed cutting rates three times by 25 basis points this year.
Gasoline prices fell, and housing inflation is accelerating and slowing down.
In terms of departments, the inflation rates of goods and services are both down year-on-year, and the price increase of goods has narrowed to its lowest level since February this year.
Specifically:
In June, energy prices rose by 1% year-on-year and fell by 2.0% month-on-month, the same as the previous month. Among them, gasoline prices fell by 3.8% in June after falling by 3.6% month-on-month in May, offsetting the impact of rising housing prices; down 2.5% year-on-year.
The price of used cars and trucks fell by 1.5% month-on-month, communication costs fell by 0.2%, and the price of new cars fell by 0.2%.
Focus on the housing inflation in core CPI, which is accelerating and slowing down:
In terms of month-on-month, housing prices rose by 0.2% in June. Among them, the rent rose by 0.3% in the month, and the owner's equivalent rent index (OER) also rose by 0.3%, both the smallest increase since August 2021. In addition, the index for lodging away from home fell by 2.0% in June, compared with a decrease of 0.1% in May.
In terms of year-on-year, the housing inflation rate fell by 5.16% in June, lower than 5.41% in May and the lowest level since May 2022; rent inflation rose by 5.07% year-on-year, lower than 5.30% in May and the lowest level since April 2022.
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