GM. This is Milk Road Macro, the newsletter that reads inflation prints the way some people read horoscopes, looking for any sign the stars align for a Fed cut.

Here’s what we got for you today:

• ✍️ What’s going on with inflation data?

• 🎙️ The Milk Road Macro Show: Bitcoin’s Golden Bull Run: Treasury Companies, Institutions & Macro Analysis w/ Charles Edwards

• 🍪 Trump warned of severe consequences if Putin rejects a ceasefire

WHAT’S GOING ON WITH INFLATION DATA?

Inflation data released this week painted a confusing picture for markets.

First, CPI data showed that there’s little sign of the feared inflationary effects of tariffs.

So expectations of Federal Reserve interest rate cuts surged.

It looked like President Trump might finally be getting the rate cuts that he’s been calling for.

But then, further PPI data changed the whole picture.

So, what’s going on?

Let’s take a look…

So, what happened with inflation data?

On Tuesday, CPI (Consumer Price Inflation) data was released.

And here’s the picture for CPI.

Cooling on a month-on-month basis (0.2%).

And remaining steady on a year-on-year basis (2.7%).

And here’s the picture for Core CPI, which strips out the volatile segments of food and energy.

Accelerating on a month-on-month basis (0.3%).

And accelerating on a year-on-year basis (3.1%).

This was a mixed bag CPI print.

In general, both CPI and Core CPI have been creeping up in recent months.

But the real signal was in the details.

The big pick-up in Core CPI was mostly fueled by services prices - while goods prices rose at a tame pace.

This means the dreaded “tariff inflation” that many people have been expecting is still not materializing in any meaningful way in CPI data - if it was, goods prices should be climbing faster.

The bottom line? 

It looked like the Fed’s persistent excuse for not cutting interest rates - a pick-up in goods inflation due to tariffs - was losing its power.

September rate cut locked in?

Wall Street’s reaction to the CPI data was almost unanimous: the data points to a rate cut in September.

Ellen Zetner, of Morgan Stanley, said: “These numbers should allow the Fed to focus on labor-market weakness and keep a September rate cut on the table”.

Alexandra Wilson-Elizondo, of Goldman Sachs said: “This inflation print supports the narrative of an insurance rate cut in September, which will be a key driving force for markets”.

Rick Reider, of Blackrock, went even further, hinting that a 50bps cut could be warranted in September.

He said the inflation print “gives the Fed the green light to lower rates in September, and possibly more aggressively than a standard move”.

Treasury Secretary Scott Bessent also called for a 50bps cut in September.

Earlier today, traders were pricing a 95.8% probability of a 25bps rate cut in September, according to CME’s FedWatch.

Then PPI changed the picture…

Today, PPI (Producer Price Inflation) data was released.

And it was scorching hot.

PPI increased 0.9% month-on-month (against expectations of 0.2%).

And it increased 3.3% year-on-year (against expectations of 2.5%).

This data suggests that companies might be starting to feel the heat from tariffs and could pass along higher costs to consumers.

Suddenly, the picture for rate cuts is now much less clear.

Wrapping up

Inflation is currently moving in the wrong direction.

Both CPI and Core CPI have been generally ticking up on a year-on-year basis over the past few months.

And PPI also just registered its largest monthly rise since 2022.

This leaves the Fed in a bit of a pickle.

On one hand, the concerning jobs report two weeks ago might suggest weakness in the labor market.

But on the other hand, inflation looks like it’s on the rise, and today’s huge PPI surge will be particularly concerning.

Overall, we’re in an unusual situation globally - Fund Managers are expecting inflation to rise across the world, but interest rates to remain flat or fall, according to Bank of America’s Global Fund Manager Survey.

As I’ve mentioned previously, the “final verdict” on US rate cuts may come on August 22 when Fed Chair Jerome Powell delivers his annual speech at the Jackson Hole Symposium.

Powell could either give the green light to a restart of rate cuts, or possibly shatter market expectations of rate cuts.

So keep your eyes peeled for Jackson Hole…

That’s it for this edition - catch you in the next one.

BITCOIN TREASURY ARMS RACE IS HEATING UP 🔥

We sat down with Charles Edwards to unpack the explosive growth of Bitcoin on corporate balance sheets, and what it means for this market cycle.

Here’s what we covered:

• 150+ public companies now hold BTC, soaking up as much as 500% of daily supply

• Why MicroStrategy’s playbook is spreading across struggling firms

• How institutional demand is rewriting the rules of the 4-year crypto cycle

• Is this financial engineering... or smart arbitrage?

Click below to watch now 👇

YouTube | Spotify | Apple Podcasts

BITE-SIZED COOKIES FOR THE ROAD 🍪

Cryptocurrency exchange operator Bullish ($BLSH) stock rose 90% on its first day of trading this week following an IPO. The company's debut rode the outsized success of recent go-publics like Figma ($FIG) and Circle ($CRCL) in a sign that the IPO window remains wide open after a challenging few years.

President Trump warned he would impose “very severe consequences” if Russian President Putin doesn’t agree to a ceasefire agreement later this week. The two leaders are scheduled to meet for highly-anticipated talks in Alaska on Friday.

President Trump also signed an executive order to ease regulations for the commercial space industry. The order includes steps to speed up the licensing process for rocket launches.

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