May CPI printed 4.2% and the market priced a September hike at 75%.
June CPI just fell 0.4% on the monththe biggest monthly decline since April 2020. Headline inflation dropped to 3.5% year over year. Core was flat for the month and 2.6% annually.
That is not a minor miss. It changes the policy path the market was pricing. The inflation shock is easing, and the next move does not have to be a hike simply because the prior print was hot.
The key question now is whether this monthly cooling persists. If it does, the market may have overpaid for tightening risk.