The Fed's Focus on Inflation

PCE inflation and the Employment Cost Index are the key things to look out for next week. We're looking for core PCE inflation to slow to 20 basis points for June, similar to the step down that we saw in the CPI report last week. In our view, this month does mark the beginning of a sustainable disinflation process, which should continue through to the end of the year. That said, the Employment cost index might temporarily throw a wrench into that disinflation narrative later this week.