ANZ on FOMC & US Data - FJElite
The Federal Open Market Committee (FOMC) is evenly split between those who saw a case for raising policy rates later this year and for holding the rates unchanged.
We continue to expect that the Fed will remain on hold this year based on our analysis that inflation is set to trend lower in coming months, driven by waning effects of tariffs, a disinflationary labour market and ongoing cooling in shelter inflation.
We forecast the June CPI inflation report to show that headline inflation fell (-0.1% m/m), driven by the decline in oil prices. Core inflation momentum is expected to remain subdued (0.2% m/m).
Inflation volatility has increased in recent quarters, largely due to several one-off shocks. Anchored inflation expectations allow for Fed policymakers’ patience to wait for one-off shocks to fade.
This week, apart from the CPI report, the June PPI report, retail sales and the University of Michigan’s preliminary consumer confidence and inflation expectations measure for July will be of interest.