Inflation Cooled to 3.5%. But Does the Fed Care?

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Why the biggest CPI drop since 2020 still leaves a hike on the table… the market doesn’t seem all that happy… what the futures market believes… a free look at a market timing tool from TradeSmith

This morning, we got the June Consumer Price Index report, and it was genuinely good.

Headline CPI fell 0.4% for the month – the biggest monthly drop since April 2020 – pulling the annual rate down to 3.5% from May’s 4.2%. Economists had expected a much smaller decline.

Meanwhile, core CPI, which strips out food and energy, was flat on the month, and its annual rate fell to 2.6%, well below the 2.9% consensus. Forecasters had actually expected core to rise slightly – this was an unusually large miss in the other direction, the kind we haven’t seen since a data quirk during last fall’s government shutdown.