Nomura Expects a 100bp Hike in July Following CPI Print
2022.07.13 21:36
Budrigannews.com – Nomura analyst Aichi Amemiya said in a note to investors Wednesday that they now expect a 100 basis point hike in July, with June CPI data cementing the need for an even more aggressive Fed.
“The Fed remains extremely data dependent, and the data suggest a larger rate increase is needed,” said Amemiya.
June CPI data rose 9.1% year on year in June, with the Nomura analyst stating it “surprised to the upside across both headline and core components, with monthly core inflation accelerating further to 0.71% m-o-m from 0.63% in May and 0.57% in April.”
Fed participants have previously communicated they are looking for stabilizing or moderating monthly inflation measures when determining whether 75bp or 50bp in July is more appropriate. Amemiya believes the outright acceleration, for the second consecutive month, will likely encourage participants to now push for a 100bp hike.
“One of the major drivers of the upside surprise in June was rent inflation, which remains a driver of overall trend inflation measures. The choice between 75bp and 100bp in July may still be close for participants, but we believe 100bp is the ‘right’ call, both from a forecasting perspective and from the perspective of optimal monetary policy,” wrote the analyst.
