The FOMC was at top of mind for investors this week, with a hike on July 26 viewed (accurately, as it turns out) as a virtual certainty. On Monday, the CME’s FedWatch tool put the probability of a 25bp hike (to 5.25%-5.50%) at 98.6%. 

Fundstrat Head of Research Tom Lee agreed with this view going into Wednesday, but he was more interested in the post-meeting press conference and what it meant for the Fed’s path going forward. “It is the qualitative views around the Fed’s sense of progress on the inflation war that matters.” 

At the traditional post-meeting press conference, Fed Chair Jerome Powell understatedly acknowledged that “the June CPI report actually came in a bit better than expectations,” but suggested that the Fed needed to see more data points like that before responding definitively.

That’s something Lee believes will happen. After soft readings for both June CPI and PCE, he predicted that the readings in July and August would be similarly soft as well. Since these will come out before the next FOMC meeting, this further supports Lee’s view that this Wednesday’s hike might well be the last one of this rate cycle. Right now, “2023 Core PCE is tracking below the Fed summary projections,” he pointed out.

As Tom Block, our W...
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