June US headline inflation was 3.0% – down from 4.0% in May.

But June’s core inflation (excluding food and energy) print was 4.8% in June – only down 0.5% from May.

This is far from the 2% target for core inflation.

The very attractive “soundbite” headline rate risks misleading the market into assuming inflation is under control – and so have the market reduce inflation expectations and interest rate exceptions.

It also could increase the risk of the central bank facing pressure to contain rates in the near term based on these headlines – with the following risk that inflation gets out of control again and much more aggressive rate increases are then needed in 6 to 12 months.

If issuers subscribe to these risks, they may consider positioning themselves to take advantage of a market window opening up soon in which they are able to lock in good fixed rates.