Bloomberg (gated) convey the info from a Citi note saying
- “We do not think markets have been adequately pricing downside risks for inflation heading into the May inflation release,”
- like five months ago, the market is coming off two consecutive lower-than-forecast CPI prints
- Yet inflation expectations over the next couple of years are currently higher than they were at the beginning of 2023, despite tighter financial conditions, lower year-over-year inflation and higher unemployment and jobless claims
- and says core inflation is set to fall meaningfully below 0.4% m/m in May for the first time since November
I posted previews earlier for the inflation report due today, in which analysts warn that higher than expected core inflation will trigger a rate hike from the Federal Open Market Committee (FOMC) on Wednesday:
- US CPI preview: "A hotter advance in categories outside of energy and food"
- Deutsche Bank US CPI preview - "event of the week" - Clear FOMC impact factor
Citi are thinking the risk is the other way though.
Fed Funds:
