Mid-week market update: Yesterday's July CPI report came in roughly in line with market expectations. Headline CPI was a hair below consensus, while core CPI was a hair above consensus. Even as the bond market greeted the report with caution, the stock market responded with a risk-on stampede in the expectation of a September rate cut.
The market reaction was not a big surprise. The latest BoA Global Manager Survey, which was done before the CPI print, showed that the institutional consensus called for falling short-term rates in the face of rising inflation.
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