Wednesday’s release of the consumer-price index report for July contained enough downside surprises to give stock investors hope the worst of inflation may be behind. Yet an undercurrent of worry remained at big-name firms like PIMCO, where the focus was on stickier components of the data that may only get worse.According to PIMCO economists Tiffany Wilding and Allison Boxer, the details of the report were “firmer” than what was implied by the annual headline CPI rate — which fell to 8.
The so-called core reading, which excludes volatile items, matters to many in financial markets because it’s supposed to represent a true underlying read on inflation — though there’s some debate over which time frame of the core gauge is most relevant. The core gauge came in unchanged at 5.9% for the 12 months that ended in July, and at 0.3% on a month-over-month basis, down from 0.7% in June.
“Today’s print didn’t change our forecast for core inflation of 5.5% and 3.5% year-over-year, for 2022 and 2023, respectively, nor did it change our near-term outlook for the Fed,” the PIMCO economists said. They still see a relatively high chance of another 75 basis points in September.Bond giant PIMCO, which managed $1.82 trillion as of June, isn’t alone in sharing its hesitancy about July’s CPI data, even while economists at BofA Securities and Jefferies called a peak in inflation.
After Wednesday’s CPI release, fed funds futures traders dropped their expectations for a 75 basis point rate increase by the Fed in September, to 37.5%, while boosting the likelihood of a smaller 50 basis point hike to 62.5%, according to the CME FedWatch Tool.
Only a fool thinks this report was good. Go ask companies what their price hikes will be for 2023. 12+%