A key CPI report

The July CPI report drops at 8:30 AM ET today, and it could be the most consequential inflation print of the year. The market is expecting a Headline CPI of +0.1% MoM / 3.4% YoY (down from 3.5%) and for Core CPI: +0.2% MoM / 2.5% YoY (down from 2.6%, lowest since January). This isn't just another data point. The Fed's September decision is genuinely in the balance (No meeting in August). After last week's surprise jobs contraction (-23K vs. +85K expected), markets briefly relaxed about a rate hike. But Chair Warsh has signaled he's open to tightening if inflation surprises to the upside. A hotter-than-expected CPI print could push Kevin Warsh to support a September rate hike at the FOMC's Sept. 15-16 meeting. what are the Wildcards? (1) Energy: Oil surged ~21% in July on Iran-related supply fears. Will it bleed into broader consumer prices, or stay contained? (2) Core services: The monthly core reading is the figure Fed officials are laser-focused on — a 0.2% print keeps the "gradual cooling" narrative alive; anything higher reopens the hike debate. Core CPI is forecast to rise 0.32% month over month and 2.5% year over year. what’s the Bottom Line? Markets are pricing roughly a 55% chance of a September hike vs. 45% hold. Today's CPI won't be the final word (we still get PPI tomorrow and another CPI before the meeting), but it sets the tone. A soft print could send yields lower and give equities breathing room. A hot one? Expect rate-hike chatter to dominate the rest of August.

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