A month ago, commenting on inflation for May 2024, I wrote that it was good news that core inflation for May was only +0.16% (expected +0.26%), but even better news is that it did not happen thanks to Shelter inflation, which in May did not even move down and amounted to +0.40%. Why? Because it can be expected that Shetler will drop significantly in the coming months, dragging down the entire core and headline inflation.
Link to comment from a month ago: https://www.jamkaglobal.com/post/this-is-it-dovish-us-cpi
And this is exactly what happened in the data for June, where Shelter inflation increased only +0.17% MoM - which is the smallest increase since January 2021! - see Figure 1.
Importantly, this may be only the beginning of a trend - see Figure 2.
If Shelter is similar in the next two months, it could be possible that the Fed will reduce interest rates at the September meeting by 50 bps! The market currently does not price in this option at all.
Another good news is low core inflation for the second month in a row - see Figure 3. Similarly, when it comes to headline inflation - see Figure 4.
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