NEWS AND INSIGHTS | INSIGHTS

CIO Notebook: Softer CPI Puts the Focus Back on September

July 14, 2026
Shannon L. Saccocia, CFA, Chief Investment Officer—Wealth

We believe that both Fed speak and data will remain in focus this summer, as investors hypothesize what could upset the current equity market run.

U.S. core CPI for June came in meaningfully cooler than expectations, flat on a month-over-month (MoM) basis and up +2.6% year-over-year (YoY); consensus was for increases of +0.2% and +2.8%, respectively. Headline CPI fell by -0.4% for the month – its largest decline since April 2020 – and posted a YoY increase of +3.5% as lower energy prices translated to a reversal in the headline reading.

While the decline in headline inflation was anticipated, the improvement in core inflation is noteworthy. Shelter prices were up only +0.1% MoM, with owners’ equivalent rent up +0.2%, rent up only +0.1% and lodging away from home down -2.3%; this marks the lowest reading for this measure since January 2021. Motor vehicle insurance (-2.0%), apparel (-0.6%), medical care services (-0.1%), and used cars and trucks (-0.2%) were lower, and airfares were up only +0.2%, while recreation prices (+0.5%) were higher.

Coming on the heels of hawkish comments over the last week from both John Williams and Christopher Waller, this print was highly anticipated as an upside surprise would likely have increased the odds of a July hike and taken some steam out of a U.S. equity market poised for a strong 2Q earnings season. Fed Chair Kevin Warsh, too, reiterated his views on inflation in his remarks prepared for Congress, stating that the Fed “has no tolerance for persistently elevated inflation” and “if we get policy right the inflation surge of the last five years will be a thing of the past.”

Instead, expectations for a hike in July fell by 25%, and now stand at only a 15% probability. (September remains a toss-up.) 2-year Treasury yields fell sharply, gold rallied, and U.S. equities pushed higher as earnings season kicked off in earnest as several major banks reported better-than-expected results. While the short-term reaction to today’s print is encouraging, the hawkish leanings of the current FOMC are unlikely to shift without evidence of sustained improvement. In addition, the situation in the Middle East remains tense, and another surge in energy prices could translate to renewed concerns of transmission to other goods and services. As such, we believe that both Fed speak and data will remain in focus this summer, as investors hypothesize what could upset the current equity market run.

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