How should we interpret the upcoming CPI? The annual rate of 3.8% doesn’t mean much... This is mainly due to the drop in energy prices (oil prices). The decline in oil prices in June will inevitably lead to a lower CPI. The market has already priced this in. What’s more critical is the third item: the core CPI month-over-month. The market is currently expecting 0.2%. If the actual value is slightly below 0.2% (like 0.21 instead of 0.24) or even 0.19 (which rounds up to 0.2%), then it means inflation is cooling, rate hike expectations will drop, and all kinds of assets will rise. If it comes out at 0.3% or even 0.4%, then brace for a market crash. But what’s even more crucial now is the digit after the decimal point. A difference between 0.24% and 0.25% may seem like just 0.01%, but when the data is released, it’s the difference between 0.2% and 0.3%. -------- So, keep an eye on the core CPI. I’ve set up a small script to calculate the second decimal place of the core CPI in real-time when the data is released. Also, we need to look at the specific components of the core CPI—what’s cooling and what’s heating up. If the heat is in core goods (clothing, furniture, cars), it might not be too bad. If the heat is in supercore (airfare, car insurance, medical care), then it’s structural inflation caused by demand and wage structures, which is truly bearish. (The FED loves to focus on supercore.) ----------- Letting AI monitor the script and a few key components. Once the data is out, I’ll post a better analysis.