We expect core CPI inflation likely rebounded modestly to 0.17% MoM in July from -0.02% in June as temporary weakness in certain service prices diminished. Our forecast for CPI super core inflation is + 0.19% m-o-m in July, a pick-up from an unexpected soft print of -0.20% in June. We expect core goods inflation was flat in July as lower prices for apparel were offset by modest increases in vehicle prices. we expect core PCE inflation picked up modestly to 0.21% m-o-m in July from 0.13% in June. Overall, despite an anticipated rebound, we expect the July CPI report will show little sign of re-acceleration in the underlying trend of core inflation. We continue to expect Fed to remain on hold for REMCY26 as inflation cools down. We do not see any signs of wage inflation as real earnings remain -ve. July NFP data of -20k has reenforced our view of a long hold from Fed. Our trade of 1yr-1yr US SOFR (half risk received at 4.15 & another half at 4.25) is now at 4.09 on Friday’s close. Our profit target is 3.90 and stop loss is at 4.4. Markets are still pricing in 28 bps of hike by Dec’26 which provides us comfort on our above trade idea.
