Data Round-Up: PPI et al Show Mounting Inflation Pressures

Headline

All observers agree that the FOMC will pause again at their July meeting. The remaining issue holding back the FOMC is that inflation remains “too low.”

Abstract

At the June FOMC meeting, policymakers decided that it would be “prudent” to delay action until after the Brexit vote. They also wanted to wait for a rebound after the weak May jobs report. Brexit passed, but U.S. equity markets quickly overcame their initial shock and have reached new highs. June payrolls came back in a big way. The remaining issue holding back the FOMC is that inflation remains “too low.” However, there was precious little in the latest data to justify such concerns. Core PPI and key high-frequency inflation indicators continue to turn up. While the FOMC seems certain to pause in July and the odds may still lean against action in September, the FOMC will feel increasing pressure to resume rate hikes in coming months.