Inflation cooled more than expected in June, giving markets relief and easing fears the Federal Reserve might raise rates soon. Headline CPI slowed to 3.5% a year, down from 4.2% in May. Core inflation, which leaves out food and energy, eased to 2.6%. A sharp drop in gasoline prices during the brief US-Iran ceasefire last month helped pull the number down.
Markets responded well. Treasury yields fell, and bets on a Fed rate hike dropped. Policymakers still caution that one good inflation report is not a win. The next worry is whether fresh tension in the Middle East and higher oil prices reignite inflation later this summer.
Kevin Warsh, the new Fed chair, testified before the House Financial Services Committee. He said, "The Fed's number one objective is to get monetary policy right, or as near to it as we possibly can, and if we get policy right, and we will, the inflation surge of the last 5 years will be a thing of the past." He called the inflation of recent years a tax on the American people and businesses.
Tomorrow brings another inflation read with PPI. ASML reports earnings overnight. Morning earnings come from Morgan Stanley, which Barron's Jacob Sonenshine expects to be great, plus BlackRock, Johnson & Johnson, Progressive, and Elevance Health. In the afternoon, United Airlines, JB Hunt, and Kinder Morgan report. Earnings season began in earnest with the banks this morning.
