This Weekly Macro Outlook highlights the key economic data releases, central bank events & speeches, and macro themes shaping global markets for the week of July 20, 2026.
Key Focus This Week:
- Central banks: ECB Monetary Policy Meeting
- Major data: Global CPI Reports: Canada, NZ, the UK, & Japan, S&P flash PMI’s July
- Key themes: US-Iran conflict escalation returns, Q2 tech earnings
Recap of Last Week
Fed communication last week reinforced that the balance of risks within the mandate has shifted toward price stability, amid rising concerns over more persistent inflation. The key policy question this week was the degree to which the Jun CPI and PPI inflation prints would provide the first evidence that inflation persistence was beginning to ease. While headline CPI and PPI for Jun were lower than expected, the more important question was what they implied for the Fed’s preferred PCE inflation measure, which has been firming over the last year. In particular, core PCE for June is likely to show a marginal moderation in underlying inflation – encouraging, but likely insufficient on its own to materially change the Committee’s assessment of inflation persistence.
Fed Communication: Less Runway for Tightening
Fed communication this week provided further context around the latest Fed Minutes. Speeches emphasized that US inflation remains too high, noting that concerns over the trajectory of PCE inflation began well before the recent energy price shock. Fed officials need to see a series of lower inflation prints to build confidence that inflation has peaked and could keep policy unchanged while disinflation continues. But if inflation doesn’t improve over the next few months, some policy firming may be appropriate. Several highlights added further colour to the Fed assessment:
- AI Boom as an Inflation Risk: Commentary reflected broader concern over the spillover from the AI boom into near-term inflation risks, rather than just as a productivity driver. NY Fed President Williams noted that “if the AI-driven demand was sustained, the Fed wouldn’t be able to ‘look through’ its results” (Bloomberg) – an important signal from one of the more dovish members, acknowledging the risks to the inflation outlook.
- Fed Governor Waller articulated the broader balancing act facing the Fed. Inflation has been persistent, broad-based, and is moving in the wrong direction. While he is prepared to hike if needed, he noted that there is less runway now for hikes, given that the labor market is not as tight as it was in 2022.
Even the most hawkish speeches were not, at this stage, calling for more than “modestly” higher rates, a view also reflected in the SEP projections. While the policy bias has shifted materially over the past year, Governor Waller’s speech in particular was a reminder that the Committee still faces a trade-off within its dual mandate, suggesting that any further tightening is likely to be measured.
US Headline CPI and PPI Undershoot
The CPI report for June was encouraging. Headline CPI inflation fell by more than expected over the month, by 0.4% (expecting -0.1%), led by a 5.7% fall in energy prices. Annual headline inflation slowed to +3.5% in June (from +4.2%), remaining elevated and still only partially reversing the recent energy-led spike. The risk now is that the unstable geopolitical backdrop and rising energy prices will again lead to a renewed rise in headline inflation.
Annual core CPI slowed to +2.6% in June from +2.8% in May, fully reversing the modest increase recorded through April and May. The Jun core CPI reading remains above the Fed’s 2% inflation objective, but unlike the Fed-preferred core PCE inflation measure, it remains on a consistent disinflation trajectory.
Importantly, the measures of broader underlying CPI continue to tell a similarly constructive story. Core, median, and trimmed mean CPI all fell back to around +2.6% to +2.7% on an annual basis. The convergence of these measures suggests that the June moderation was likely broadly based rather than driven by a small number of volatile outliers.
The PPI was somewhat less encouraging, pointing to more persistent inflation pressures for domestic producers. While headline PPI fell by more than expected in Jun by -0.3%, and annual PPI slowed to +5.5% in Jun (from +6% in May), measures excluding the effect of the fall in energy prices remained firm, suggesting that underlying price pressures have yet to ease.
PCE Nowcast for June
Although the headline June CPI and PPI data were encouraging, the key question is whether they will translate into a similar moderation in the Fed’s preferred PCE measure. This distinction matters because core PCE has followed a materially firmer trend than core CPI, and this has been central to the Committee’s renewed concerns around inflation persistence. Disinflation in core PCE stalled in mid-2024 and, since the second half of 2025, has begun to firm, moving in the “wrong direction”. As Fed Governor Waller noted, this began well before the energy price shock.
The latest Cleveland Fed nowcast for PCE inflation in Jun (based on this CPI & PPI data) indicates that headline PCE is expected to fall by 0.12%, and this would reduce headline PCE to +3.7% in June (from +4.1% in May). Core PCE is expected to remain somewhat sticky at +0.19% over the month in June, and due to base effects, would only reduce annual core PCE to +3.3% (from +3.4% in May). While this result removes the likelihood of another “hot” inflation print for Jun (and removes any expectation for a Jul hike), a single softer monthly print isn’t enough with core inflation still well above target. The Fed will need to see a series of lower prints before they have confidence in a more durable disinflation trend.
US Q2 Growth Outlook Firms
The US growth backdrop remains positive, with a solid retail sales result for June firming the Q2 growth outlook. The latest Atlanta Fed GDP nowcast for Q2 GDP run rate increased to +1.7% (from +1.3%) after the latest Jun data.
- Retail Sales: Nominal retail sales increased by +0.2% in Jun and May was revised higher to +1%. In real terms, retail sales growth was solid at +0.6% over the month.
- Industrial Output & Housing Starts: Industrial output growth was modest, and a moderate improvement in new housing starts resulted in little change to the contribution to domestic growth and staying positive on the whole.
- Overall, personal spending, previously one of the weaker components, provided a welcome boost to the overall growth run rate in the data last week.
Outlook for the FFR
For now, markets are still pricing in a slight chance of a hike in September (Source: CME FedWatch). The re-escalation in the US-Iran conflict is causing energy prices to increase again, placing upward pressure on headline inflation and rate hike expectations.
The Week Ahead: What We Are Watching
Attention now turns to the next round of evidence that will shape the global policy outlook. While the Fed enters its pre-FOMC blackout period, this week’s focus shifts to inflation data across several major economies and the implications for upcoming central bank meetings.
Central Bank Calendar: The ECB meets this week, followed next week by the FOMC (Jul 28–29), the BoE (Jul 30), and the BoJ (Jul 30–31).
Global CPI Focus (Jun): Key inflation prints for from Canada, NZ, the UK, and Japan will set the stage for upcoming central bank rate path adjustments.
Growth Tracking: With light US domestic data, the preliminary S&P Global PMIs for Jul will provide the first clear glimpse into Q3 private sector momentum across major developed economies.
Geopolitical and Energy Watch: Re-emerging geopolitical risks and firming energy prices remain key cross-currents for global growth and inflation forecasts.
ECB Monetary Policy Meeting
- After hiking rates by 25bps at its last meeting citing “broadening inflation”, the ECB is expected to keep settings unchanged at this meeting.
Global CPI Reports June
Canada CPI Jun
The June CPI will be important for the BoC’s outlook on core inflation. Last week, the BoC kept rates on hold to balance the inflation backdrop between exogenous headline inflation shock and slack in the domestic economy. However, it noted that it will “not allow higher oil prices to become persistent inflation” – so changes in core inflation will be important for the BoC’s assessment. The BoC’s projection of a gradual path back to 2% inflation by early 2027 may be challenged as oil prices begin to rise again.
- Headline CPI is expected to fall by -0.2% in Jun (from +1% in May).
- The BoC measures of underlying inflation – the median and trimmed mean- are both expected to be unchanged at +2.1% and +2% respectively.
NZ CPI – Q2
The RBNZ recently increased rates for the first time, citing persistent underlying inflation in the domestic economy (non-tradable inflation), despite some slack remaining in the economy. Higher headline inflation in Q2 is likely to be the result of higher energy prices. This inflation print is expected to confirm those firmer underlying inflation readings.
- Headline CPI Q2 – QoQ +1.5%, from +0.9% in Q1.
- Annual CPI is expected to increase to +4% in Q2, from +3.1% in Q1.
UK CPI Jun
The BoE will meet next week on 30 Jul.
- Headline CPI is expected to moderate slightly to +2.7% over the year in Jun, from +2.8% in May.
- Core CPI is expected to also slow slightly to +2.5% in Jun, from +2.6% in May.
Japan CPI Jun
The BoJ will meet next week, 30-31 Jul.
- The BoJ’s preferred measure of core inflation, core CPI ex-fresh food, is expected to increase slightly to +1.6% in Jun, from +1.4% in May.
Australia – Labour Market Report Jun
Solid labour market conditions will continue to support the RBA outlook as it maintains more restrictive policy settings to address persistent core domestic inflation. The next RBA meeting is 10-11 Aug.
- Net employment growth is expected to moderate to +15k over Jun, from +40k in May.
- The unemployment rate is expected to be unchanged at 4.4%.
S&P Global PMIs – Prelim Jul
The suite of preliminary S&P PMIs for July will provide the first view of growth momentum across the larger economies at the start of Q3.
US Treasury Issuance: 20 – 24 July 2026
This week, the US Treasury will auction and settle approx. $561bn in ST Bills and the 20-Year Bond raising approx. $106bn in new money. Approx $32.7bn in ST Bills will mature on the Fed balance sheet and will be reinvested. The US Treasury will also auction the 10-Year TIPS this week.
A detailed version of this outlook, including the full calendar of key data releases, is available in the briefing document below:
Comments and feedback are welcome. Please email me at kim.mofardin@marscapitalpartners.net
For a structured, technical analysis outlook for global markets that complements this macro outlook, explore the latest Mars Market Update.
