Favorable Setup Persists, but the Lack of Follow-Through Requires Closer Scrutiny

Jun 13, 2024 • 5 Min Read

Overall, it was a Good CPI/FOMC Day

As any market observer knows by now, CPI came in remarkably cool yesterday. May CPI data was soft across the board, with headline inflation at 0.0% M/M vs. 0.1% expected and core inflation at 0.2% M/M vs. 0.3% expected.

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The unexpected data fueled a violent rally across all risk assets as rates fell, and the futures market started to price in additional cuts, undoing much of the damage following the hot NFP print last Friday.

Fast forward to the FOMC presser, and we received a relatively hawkish dot plot, where Fed officials priced in one cut for the rest of this year and raised their longer-term inflation expectations. This reversed some of the gains seen in the market. There is speculation over whether the committee was able to fully digest the morning’s data and reflect it in their economic projections, but regardless, this was overall a hawkish data point.

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The tone of the press conference was typical, with Chair Powell sticking to his usual script, applauding progress thus far but remaining steadfast on the need for further progress. Importantly, there was no mention of an additional rate hike, which has been enough to keep the market buoyant to date.

Overall, we categorize this day as a net positive macro day for c...

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