Market Pulse: Inflation Holds the Fed’s Cut Window Open

Disclaimer: This analysis is for informational purposes only and not financial advice.

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Inflation Data Dropped

• Core Inflation MoM: Forecast 0.3%, Actual 0.3%
• Core Inflation YoY: Forecast 3.0%, Actual 3.1%
• Inflation MoM: Forecast 0.2%, Actual 0.2%
• Inflation YoY: Forecast 2.8%, Actual 2.7%

An interesting print. We get slightly hotter on the Core, but slightly softer on the headline numbers. 

• Short-Term: This is fine for markets, as it still allows the FED to cut. Yes, there are parts of this print with hotter elements but this is still fine and it's not a massive tariff pass-through into the inflation numbers.
• Market Reaction Since: A small move higher. This can last, because as we note above, it does allow the FED to feel more comfortable with cutting rates in September. Note, there is more data ahead before the mid-September FED Meeting.
• How To Position: We maintain our positioning in the market and we're looking to continually buy into more meaningful pullbacks should we get one.

Cryptonary's Take:

We get a slight move up in the Core readings, but it's only small, and that's potentially what markets are moving higher on here i.e., we've avoided a meaningful upside surprise. We remain allocated, and this aids our argument that we'll get an Interest Rate cutting cycle over the coming quarters which will help risk assets move meaningfully higher.