Kudret Ayyıldır: What to expect on the most precious day of June?

Today we will focus first on the US CPI and then on the Federal Fund Target Rate / Interest Rate / FOMC Economic Projections and Fed Chairman Powell Speech.

When we look at the Fed Funds Futures side before the CPI and the Fed, the predictions for one discount and that one in September are included in our price range.

Of course, the background of this is strong employment / rising prices and solid inflation numbers. The market took on this identity with the Non-Farm Employment and Average Hourly Income data on Friday, June 7, and now the final say will be on the Fed’s side.

CPI is not very important for the Fed’s decisions today, but will shape the instant reaction of the markets;

* If the headline CPI is 0.1% monthly, it is expected to be 3.4% annually.

* Core CPI is expected to be 0.3% monthly and 3.5% annually.

* A decline is expected in the headlines on a monthly basis and in the core on an annual basis

The service item creates a significant rigidity in inflation. Although housing costs in particular continue to be annoying during this period, it is noteworthy that Headline Inflation has been flat for almost a year. This is why the Fed says interest rates will be high for a long time.

In this respect, we can follow today’s CPI data to answer the question of what the situation is about rigidity, whether the Fed will be able to breathe a little or whether it will continue to be suppressed. Above expectations, it gives a question mark in the Fed’s interest rate cut, and below expectations, it gives breathing space in the Fed’s interest rate cut.

Of course, let’s not skip this here. Fed speculation and Fed decision are not the same. In other words, Powell will not change his speech and projections based on today’s CPI data before his speech. But traders will speculate and trigger immediate action.

Moving on to the Fed side, we see economic projections every 3 months. Here we examine the expectations of FOMC members on Growth, Unemployment, PCE Inflation and Interest. Especially Dot Plot, that is, members’ interest claims, will be very critical today.

You look at who is Hawk, who is Neutral and who is Dove from the table. Our main focus will be on how many rate cuts it will make in both 2024 and 2025, and how far it will deviate from its March claims.

For example, if it reduces the expectation of 3 interest rate cuts to 2 this year, the markets will find the Fed brave and pull it into the pricing area with a dovish tempo.

However, if Fed governors reduce their personal interest rate predictions by 1 in line with market expectations, they will turn into a hawk; if they say there is no interest rate cut, brother, they will turn into a very hawk.

After the projections, we will focus on Fed Chairman Powell’s speech on stage. Although it is important to decide whether he will take action in a tone parallel to the projections or in the opposite direction, the rigidity of inflation, strong employment and price increases do not make him too dovish.

We will talk about everything. For this reason, we look forward to our live broadcast at 21:15…

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