FED: Gov Waller: Important To Communicate Reaction Function

Analysts remain nearly unanimous that the next move will be a hike rather than a cut, but the vast majority see a hold through the rest of this year with 50bp of increases in 2027. See table for more details.

Our preview of the June BOC meeting is Here

• The Bank of Canada is overwhelmingly expected by both markets and analysts to maintain its overnight rate for a 5th consecutive decision at 2.25% at the June meeting (announcement on June 10).
• Mixed activity data and an uncertain near-term geopolitical outlook make it likely that the BOC will also likely leave its message from the last meeting in April largely intact: potential upside in rates is greater than the downside at this juncture, but maintaining policy is still the “right thing to do for today” as uncertainty over trade and energy prices looms large.
• Rate markets imply a full 25bp hike by year-end, but the BOC has no real urgency to make a move given still-soft core inflation readings and possible paradigm-shifting developments from ongoing Canada-US-Mexico trade negotiations and US-Iran talks.

• With the labor market showing continued signs of stability and more recently strength, the Fed’s focus is increasingly on upside inflation risks to the mandate as multiple FOMC members call the previous implicit easing bias into question.
• A far stronger than expected May payrolls report has seen a 25bp hike fully priced for December ahead of what was already heightened market attention on Wednesday’s May CPI report after strong April readings.
• Early analyst entries to the Bloomberg survey look for headline inflation at 0.5% M/M after 0.64% in April and core at 0.3% M/M after 0.38% M/M.
• There will be interest as to whether there was any bounce back after some unexpected softness in core goods as well as a fading in April’s strong service dynamics.
• Taking a step back, headline CPI inflation could firm four or five tenths to 4.2-4.3% Y/Y whilst core might only firm a tenth to 2.9% Y/Y. When it comes to core PCE tracking, small details will continue to be important, a prime example being the booming software category amidst shortages with its tiny weight in CPI but much larger weight in PCE.
• Thursday’s PPI report will then help dial in these estimates along with an updated assessment of broader input costs after a very strong April report.

Date         ET     Impact Event
Mon 8 Jun 1100 **        NY Fed Survey of Consumer Expectations

Tue 9 Jun 0600 **        NFIB Small Business Optimism Index
Tue 9 Jun 0815 ***       ADP Employment Report
Tue 9 Jun 0830 **        Trade Balance
Tue 9 Jun 0855 **        Redbook Retail Sales Index
Tue 9 Jun 1000 ***       NAR existing home sales
Tue 9 Jun 1000 **        Wholesale Trade

Wed 10 Jun 0700 **     MBA Weekly Applications Index
Wed 10 Jun 0830 ***   CPI
Wed 10 Jun 0830 **    US CPI Annual Revised
Wed 10 Jun 1400 **    Treasury Budget

Thu 10 Jun 0830 ***    Jobless Claims
Thu 10 Jun 0830 ***    PPI

Fri 11 Jun 1000 ***      UMich Surveys of Consumers