NBP: July Cut Was 'Cautious Adjustment' Not Start Of Cycle

Laura Weiss at Punchbowl News reports on X that Senate Republicans will hold an all-conference meeting to discuss the 'One Big Beautiful' reconcilliation bill on Wednesday afternoon.

• Come as GOP leadership and President Donald Trump try to nudge wavering Senators to back the package on an accelerated timeline to get the final bill to Trump desk by July 4.
• The prevailing view on Capitol Hill is that Senate Majority Leader John Thune (R-SD) will make as few changes to the House-passed bill as possible. The primary focus for Thune and Trump is to keep conservatives, concerned about the debt, and moderates, concerned about Medicaid and IRA tax credits, onside for a final vote.
• Treasury Secretary Scott Bessent is expected to stress to lawmakers that Congress must demonstrate to markets it is on track to pass a debt-limit increase – included in the package - by mid-July.
• NYT reported this morning that the megabill could contribute to an "exodus" from US assets, noting that Wall Street is watching Section 899 in the House-passed bill, which “could push [foreign investors] to put their money elsewhere.”
• The Senate Armed Services Committee is expected to roll out their portion of the bill today. Environment and Public Works is likely to follow on Wednesday, Commerce on Thursday, and Banking on Friday. The Committee sessions are loosely scheduled from easiest to hardest, with Finance, the panel with jurisdiction over Medicaid, likely to be among the last to release text. 

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Eurozone core inflation prices fell 0.12% M/M in May according to the ECB’s seasonally adjusted data, after rising 0.45% in April. Unsurprisingly, services drove the pullback, with prices falling 0.17% M/M after a 0.70% increase in April. Core goods inflation was 0.06% M/M (vs -0.02% prior).

• As implied by the country-level NSA data over the past week, the services softness was largely a function of unwinding Easter effects. However, the extent of the SA and NSA deceleration from April’s levels could suggest more broad-based disinflation in non-travel-related categories. We’ll have to wait for the final release on June 18 to see whether that was the case.
• Attempting to correct for Easter effects, average monthly seasonally adjusted services inflation between March-May was 0.27% in 2025. That’s below the 0.41% seen in 2024 and 0.37% in 2023, providing further evidence that underlying disinflation is progressing.
• 3m/3m core inflation momentum eased to 2.70%, after 2.87% in April and 2.37% in March. Services momentum fell to 3.95% from 4.10% prior.
• Referencing the NSA data, JP Morgan write: “That core inflation in May (2.3%oya) undershot the March level (2.4%oya) may be linked to an additional distortion. The late Easter also comes with a late Pentecost this year, which also impacts short holidays in some countries (skewed towards June rather than May). This effect is smaller than the Easter effect but can be significant”.