BofA: What we expect from the US June CPI print on Thursday


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Bank
of
America
believes
the
Fed
will
first
cut
rates
in
December
but
conceded
that
much
of
what
happens
next
could
hinge
on
Thursday’s
inflation
report.
The
market
is
pricing
in
19
bps
of
easing
through
the
Sept
FOMC
and
50.6
bps
by
year
end.

For
this
report,
BofA
forecasts
a
modest
increase
in
both
headline
and
core
CPI,
which
should
be
favorable
for
the
Fed.


Key
Points:


  • Headline
    CPI:

    Expected
    to
    rise
    by
    0.1%
    month-on-month
    (0.11%
    unrounded)
    due
    to
    another
    drop
    in
    energy
    prices,
    leading
    to
    a
    year-on-year
    rate
    of
    3.2%
    and
    an
    NSA
    index
    of
    314.770.

  • Core
    CPI:

    Predicted
    to
    increase
    by
    0.2%
    month-on-month
    (0.24%
    unrounded).
    Although
    slightly
    higher
    than
    May,
    it
    would
    still
    be
    a
    positive
    outcome
    for
    the
    Fed.

  • Fed
    Rate
    Cuts:

    Should
    the
    CPI
    report
    align
    with
    these
    expectations,
    BofA
    maintains
    their
    forecast
    for
    the
    Fed
    to
    begin
    its
    rate-cutting
    cycle
    in
    December.
    However,
    a
    consistent
    0.2%
    month-on-month
    increase
    in
    Core
    CPI
    could
    tilt
    the
    risk
    towards
    an
    earlier
    cut,
    especially
    with
    signs
    of
    softening
    economic
    activity.


Conclusion:

BofA
expects
the
June
CPI
report
to
show
modest
increases
in
both
headline
and
core
CPI,
reinforcing
the
positive
trends
from
May.
This
should
support
the
Fed’s
current
policy
trajectory,
with
potential
for
rate
cuts
starting
in
December,
unless
continued
low
Core
CPI
prints
suggest
an
earlier
intervention.

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