JPMorgan's Feroli's View on US CPI - FJElite

The next 2 inflation prints are important for assessing the probability of a Fed hike in September. The US has dodged the proverbial bullet from the Middle East conflict in terms of seeing an inflation spike, which was expected earlier this year, potentially enough of a spike to trigger a recession. Now, the market will want to see evidence that Core inflation remains sticky or if another period of disinflation is possible. In any case, Warsh is not tipping his hand. Options pricing is slightly below what we have seen in the recent past, which is closer to a 1.1% implied move. Equity positioning is cleaner but the bond market appears move sensitive to inflation spikes, which is reflected in our scenarios whereby a hawkish print would have a larger impact than a dovish print. Longer-term, keep an eye on China's inflation as its PPI print tends to precede US CPI / PPI and China's PPI just printed a 3-month low.