Mufg us macro strategy inflation update july 2026 cpi preview

Key arguments

• MUFG forecasts July headline CPI at 0.12% MoM (3.4% YoY) and core CPI at 0.17% MoM (2.4% YoY), in line with the median estimate.
• Historical data shows that months with 0% or negative core CPI are often followed by continued weakness, but a modest rebound is expected in July due to normalization in auto insurance and wireless phone services.
• Auto insurance and wireless phone services combined reduced overall MoM CPI by ~0.1% points last month; a reversal in July supports a modest rebound in core CPI.
• Weaker travel demand and used auto prices should keep airline fares and used autos subdued.
• Base-case expects a minor rates rally of 3-5 bps if core CPI rounds up to 0.2%, while a 0.1% core reading could trigger a larger 5-8 bps rally.

Corresponding source evidence

1. Downside risk: Inflation data has taken on greater importance in the macro space, so a 0.1% core reading, especially following a 0% last month, would ease some of the pressure on the Fed to raise rates this soon. Unlike the reaction after the weak & unusual July NFP, we expect a decent rates rally of 5-8 bps if core CPI comes in that soft. · immediate