Morning Minutes

Consumer Prices and Central Banks In the Spotlight Today

Bank of Canada



US index futures had been trying to mount a comeback this morning, but the bottom has fallen out and gains have quickly turned into losses following the release of a red-hot US consumer price inflation report.

US inflation continued to ramp up in June, keeping pressure on the Fed to continue its program of interest rate increases. Headline consumer price inflation for June jumped up even more than feared (9.1% vs street 8.8% and previous 8.6%). Core inflation, excluding food and energy, was higher than expected but could be starting to level off (5.9% vs street 5.7% and previous 6.0%).  

Other central banks have remained hawkish and in tightening mode. Overnight, the Reserve Bank of New Zealand announced another 0.50% rate increase, as had been widely anticipated, and maintained its commitment to getting inflation back down into its target range, even while recognizing economic risks.

The Bank of Canada is widely expected to announce a 0.75% interest rate increase at 10:00 am EDT today. Investors may look to the statement for commentary related to stagflation, and if there are any hints related to how long or how fast the central bank may continue to increase interest rates.

US index futures are currently down across the board with Dow futures falling 1.0% and NASDAQ futures dropping 2.2%. European markets are down as well with the Dax falling 1.7% and the FTSE sliding 1.1%. The US 10-year treasury note yield has climbed back up above 3.0% on the inflation news, pushing the US Dollar higher and the Euro down almost to par. The Canadian Dollar is holding steady relative to the US Dollar but could be active around the Bank of Canada decision. Gold is now down about 1.0%. Commodities are also retreating again this morning with WTI crude oil down 1.2% and copper down 0.8%.

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Colin Cieszynski, Chief Market Strategist

Colin Cieszynski, CFA, CMT
Chief Market Strategist
+1 (647) 282-4428

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