Inflation spikes & oil shock; structural real rates rise; COLA bill proposed
Key Questions
What were the latest CPI and PCE inflation readings?
May CPI showed headline inflation at 4.2% and core at 2.9%, while PCE core came in at 3.4%. June CPI is expected to decline due to lower gasoline prices.
Why did oil prices surge above $94?
Oil prices rose above $94 amid threats from Trump regarding Iran. This contributed to broader market concerns about inflation and energy costs.
What do bond markets indicate about future interest rates?
Bond markets are pricing in higher real rates due to concerns over Fed credibility, AI-driven capital demand, and fiscal deficits. This suggests expectations of structurally elevated rates.
What is the Social Security COLA bill (S.3059) about?
The bill proposes changing how annual cost-of-living adjustments are calculated to better reflect seniors' actual costs. It aims to improve the accuracy of Social Security raises.
How has the dollar performed recently and why?
The dollar fell to a two-week low following weak jobs data. This decline coincided with rallies in gold and silver.
What role does wage growth play in assessing inflation?
Wage growth is viewed as a leading indicator that may signal whether recent CPI spikes are temporary noise. It helps distinguish persistent inflation pressures from short-term fluctuations.
How are mortgage rates responding to ongoing inflation?
Mortgage rates have risen, with the average 30-year refinance rate reaching 6.82% and fixed rates at 6.36%. Sticky inflation is keeping borrowing costs elevated.
What impact could the new COLA formula have on future Social Security raises?
The proposed change could lead to more accurate adjustments, with recent estimates showing a 2027 raise around 3.8% or about $77 more per month. It addresses gaps in tracking seniors' specific expenses.
May CPI 4.2% headline, core 2.9%; PCE core 3.4%; oil surged above $94 on Trump Iran threats. June CPI expected to fall on gasoline. Bond markets signal higher real rates due to Fed credibility, AI capital demand, fiscal deficits. Social Security COLA bill (S.3059) proposed. Dollar sinks to 2-week low on weak jobs data, gold/silver rally. Wage growth as leading indicator suggests recent CPI may be noise. Samsung earnings drag US chip sector on AI buildout costs and higher rate expectations, signaling market rotation.