A Sharp Inflation Slowdown Could Keep Rates Unchanged

A lower-than-expected inflation reading tomorrow could still prompt the Fed to hold rates this month, although markets are pricing a rate increase, Spartan’s Peter Cardillo says in a note. “Although a long shot, the possibility of the Fed staying on hold in July should not be excluded,” he says. “In fact, we think if the core rate of inflation surprises the market, the Feds may elect to gather more data before pulling the trigger.” Forecasters expect June 12-month core CPI to slow slightly to 5% from May’s 5.3%, which is still well above the Fed’s 2% target. The odds of a hike stand at 92% in the CME’s FedWatch tool.