US core CPI rises 0.2%, traders expect Fed December hike
Even though US core inflation was lower than predicted in May, bond traders are still betting the Federal Reserve will raise interest rates by December.
The core CPI (basically prices minus food and energy) went up just 0.2%, missing forecasts.
This gives Fed official Kevin Warsh a bit of breathing room to take things slow with policy changes.
US 2-year yields dip, dollar softens
Market expectations haven't shifted much: swaps still point to a December hike, and two-year Treasury yields dipped slightly. The US dollar also softened.
Some traders think strong job numbers and past energy price spikes could push the Fed to act as early as September, adding uncertainty to what happens next.
As Dan Carter, senior portfolio manager at Fort Washington Investment Advisors puts it, the softer inflation data lets the Fed "The biggest takeaway is that it gives the Fed a tiny bit of breathing room,"