Good Thursday AM,

PPI was our friend.

At one tenth of a percent (for the second month) and an annualized 1%, it is hard to see inflation being rampant, “you’re still going to hear people say year over year, it’s still too strong”. The thing is that’s not the proper lens. The front windshield is much larger than the rearview mirror. The analysis is to look at the monthly numbers and the trend contained in those numbers. Treasuries are on a tear and now have dropped 30basis points in four days. We’re back down to 3.79 and if we get some more follow through buying, from here it’s a small jump own to 3.67. I do not think this changes the Fed’s mindset to raise rates this month (at least for now) but I do see it likely making this a one (more) and done. While I feel rates are going to improve further, it is a good idea to take the gains and smile. Anything closing in July should likely lock and float down on any additional improvement.

From the WSJ:
Inflation Eases, Fed Still Likely to Raise Rates This Month

Inflation cooled last month to its slowest pace in more than two years, giving Americans relief from a painful period of rising prices and boosting the chances that the Federal Reserve will stop raising interest rates after an expected increase this month. The consumer-price index climbed 3% in June from a year earlier, the Labor Department said Wednesday, sharply lower than the recent peak inflation rate of 9.1% in June 2022, when gasoline prices hit a U.S. record average of $5 a gallon. Inflation was last close to 3% in March 2021, Gwynn Guilford and Nick Timiraos report.

Fed officials are on track to raise rates to a 22-year high at their July 25-26 meeting because economic activity hasn’t slowed down as much as anticipated. But the inflation report calls into question whether the Fed will lift rates after that, as most officials projected last month.

Please remain safe and stay healthy, make today great!