While headline US consumer prices are expected to show a further slowing in June, inflation pressures are building in China that could soon spill over globally, including the US. Short-term rates and bond yields continue to be all-in on a benign inflation outcome.
China seems to have receded in importance in investors’ minds in recent years as it has battled to recover from Covid lockdowns. But a sustainable recovery there still has the ability to deliver a shock to global and US markets, boosting inflation that is already proving stickier than policymakers expected.
