The CPI report has just been released, and it’s kind of a nothing burger on the headline indices with headline and core coming in at 3.2% vs 3.3% expected for headline and 4.7% vs 4.7% expected. As we have told you before, the increase in headline compared to last month was expected due to basis effects, while core continues the disinflationary trend. Both headline and core increase 0.2% MoM, which is close to the golden number, 0.17%, which compounded rounds to 2% annually. 

So still dovish reports judging from a monetary policy perspective, and unless something changes, it might soon be time for the long-awaited pause despite the headline being above 2% in Q3/Q4 (which will mainly be because of shelter).

As expected energy picked up m/m on the back of the strong month in crude and natural gas but due to the small weight in the index it still didn’t matter for the deflationary feel that we are left with. Used cars and trucks took a big fall and we also note that the notorious lagged shelter component which peaked in March is still to be felt in the overall basket.