Data Preview & Forecast
MUFG forecasts June 2026 headline CPI at -0.09% MoM (3.8% YoY) and core CPI at 0.24% MoM (2.8% YoY), in line with the median estimate from Bloomberg contributors.
The base effect is expected to contribute 0.23% points to YoY growth in core CPI, up slightly from May.
What to watch out for: Fuel surcharges are expected to keep airline fares elevated in June despite weakening demand and significant jet fuel price deflation. World Cup related demand is expected to push up lodging inflation, but overall “supercore” prices are expected to ease in June, following strong growth in May.
Market Thoughts
Base-case: A 0.2% MoM core reading is in line with consensus, but markets are on edge with a low tolerance for an upside surprise. That said, the front-end has already discounted some of these concerns following the hawkish comments from Waller (who specifically referenced this CPI release). Therefore, if we get a 0.2%, 2s should fall back into the recent range and have a minor rally of ~4-7 bps.
Upside risk: 2s have broken above the 4.25% level (that was providing some resistance), so a rounded up 0.4% MoM core print is likely needed to garner a reaction and for rates to continue moving higher.
Downside risk: In general, 0.1% inflation prints are rare – especially in this environment of supply shocks. Considering we have not had that low of a core reading since early last year, rates could rally 7-12 bps.
Please see the link for the full write-up with charts and scenarios…