US Economics: The Daily Update – Stale FOMC guidance

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US Economics: The Daily Update – Stale FOMC guidance

US Economics

09 July 2026 Citi Research

The basic view of Fed officials and markets has been that labor markets are "stable"

(as evidenced by an unchanged unemployment rate) while inflation is above target.

Given that backdrop, markets are pricing risks as balanced toward the Fed hiking

rates.

But we expect upcoming data to flip the balance of risks. Released after the June

FOMC meeting, the June jobs report showed just 57k new jobs and 74k downward

revisions to previous months. The unemployment rate dropped from 4.3% to 4.2%,

but only due to a 0.3pp decline in the participation rate - absent that the

unemployment rate would stand at 4.6%. Jobless claims on a weekly basis (out

again today) should help indicate if jobs data will stay weaker over the summer -

repeating a seasonal pattern from 2024 and 2025.

Minutes showed concern that measures of underlying inflation were picking up.

Some of this is likely to be revised away in September when the BEA is set to revise

down core PCE 20-30bp, in part by reducing an inappropriately large weight on AI-

related prices. Core CPI monthly readings can come in very soft in coming months

as airfares can decline with energy prices and motor vehicle insurance weighs on

the readings. We expect sub-2.5%YoY core CPI in August.

Minutes gave little new information but suggested that despite 9 dots theoretically

advocating hikes, there was little urgency amongst these officials to actually

deliver them. By September, when the next SEP is due, softer jobs data and cooler

inflation will have shifted concern away from inflation upside and toward

employment downside.

Key data today:

8:30 AM

– We expect initial claims to be little changed at 213k during the week of July