United States: Inflation Markets Look ahead and look back

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United States: Inflation Markets Look ahead and look back

Barclays | United States: Inflation Markets

Surprises, surprises

Since the beginning of 2025, CPI surprises versus the fixing generally have been biased to the

downside (Figure 2). More broadly, though, another way to think about "surprises" is the gap

between the print versus the trend (proxied with the three-month moving average) going into

the release. By this definition, surprises have been quite small of late and pale in comparison to

the shocks seen earlier this decade (Figure 3). We see no particular reason to think that this

month will be any different.

The "core" focus of this print

Instead, we would offer that the market should have a heightened focus on the rent of primary

residence and owners' equivalent rent readings. Recall that in the May CPI data, one of the

sources of strength was a surprisingly strong reading for rent of primary residence specifically,

which accelerated from 27bp (if we divide the double-counted April print in half) to 36bp, the

highest reading since July 2024. Indeed, last month we noted that "This poses the question of

whether rents are accelerating and, given the propensity for these categories to trend,

combined with the high weight, whether the inflation market is underpricing this upside

risk" (Sympathizing with Jimmy McMillan, June 11, 2026).

While there may be compelling reasons to largely look through a one-off jump in rent prints

(geographic concentration, lack of confirmation in high frequency new rent metrics, etc), it is

much more difficult to ignore two in a row. In essence, another strong rent reading would be an

extremely important narrative shift for core services risks and accelerate the bullish move to

start Q3, in our opinion.

Carry flip confirmation