Goldman Sachs projects June core CPI at 2.8% y/y, below consensus, as Fed Chair Warsh faces Congress. Markets eye dovish signals amid energy price declines.
Goldman Sachs Projects Soft June Core CPI Print
Goldman Sachs forecasts June core CPI rose 0.17% month-on-month, below the 0.2% consensus, rounding the annual rate to 2.8% from 2.9%. Headline CPI is expected to decline 0.11% m/m, driven by a 4.4% drop in energy prices, pulling the y/y rate to 3.87% from 4.25%. The softer core reading suggests continued disinflation despite war-related energy shocks.
The bank attributes the muted inflation to softer autos and shelter categories. Used car prices are projected to fall 0.5%, with smaller declines in new cars and insurance. Shelter inflation remains benign, with owners' equivalent rent rising 0.23% and the rent index up 0.17%. Travel services show moderate gains, with airfares up 1.5% and hotels up 0.3%.
Implications for Dollar and Bond Markets
A subdued core CPI print would likely support bonds and ease near-term pressure on the dollar. However, markets may face complexity if headline declines mask persistent core pressures. Goldman notes core PCE could rise 0.24% m/m, with financial services contributing more than core CPI due to lagged equity gains from May.
Fed Chair Kevin Warsh's congressional testimony on Tuesday and Wednesday will be critical. His recent comments at the ECB's Sintra forum, suggesting declining inflation expectations and risks, contrast with the Fed's prior report citing tariffs and energy costs as inflation drivers. Traders will scrutinize his remarks for alignment with the data.
Key Factors to Watch
- June CPI release at 8:30am ET on Tuesday.
- Warsh's House Financial Services Committee testimony at 10am ET Tuesday.
- Potential divergence between core CPI and core PCE trends.
- Impact of energy price declines on broader inflation narrative.
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