US Economics: The Daily Update – Focus returns to data

Research evidence excerpt

US Economics: The Daily Update – Focus returns to data

US Economics

29 June 2026 Citi Research

Oil prices are slightly higher this morning as markets continue to monitor

developments in the Strait of Hormuz. But with Brent crude oil having fallen below

pre-conflict prices las week, Treasury yields have room to fall should economic

data push against the risk of Fed rate hikes.

We think it will, starting with a softer jobs report this week. We are projecting just

25k new jobs, reflecting the rise in jobless claims and payback from aberrantly

strong government and leisure and hospitality hiring in May. Softer payrolls would

push against the idea that the job market might tighten necessitating rate hikes.

In our projection the unemployment rate is unchanged at 4.3%, in part due to a

declining participation rate. That would look consistent with a "stable" labor

market for now. We expect the unemployment rate to rise in coming months,

following continuing jobless claims higher and repeating its seasonal pattern from

the last two years.

Core CPI is also likely to remain slower in coming months with slowing shelter

prices and drag from motor vehicle insurance. Core PCE has diverged from CPI due

to inappropriately overweighting AI-related prices and boost from rising equity

prices. But the BEA announced last week methodological changes that could mean

significant downward revisions to core PCE, bringing it more in line with other,

slower inflation metrics.

Figure 1. Market is pricing in a hike this year Figure 2. 2s10s curve has flattened since the start of the

year

cumulative pricing at each meeting LHS 06/29/26 10y Tsy yield - 3m Tsy yield 10y Tsy yield- 2y Tsy yield RHS

market pricing policy rate RHS 06/29/26

120 77

38 4.1

33 4.0 67

28 80 62

3.9

57 23 60