'Teflon' Inflation Won't Stick, JPMorgan's Kelly Says

• US July Core CPI rose 0.2% M/M, in line with estimates, with disinflationary trends noted in energy and future tariff costs.
• Wages have risen less than CPI inflation for four consecutive months (3.2% vs. 3.4% Y/Y), indicating 'Teflon inflation' that won't stick due to lack of a price-wage spiral.
• Kelly suggests the Fed should 'stay on hold' and allow inflation to gradually heal, as further rate hikes are unnecessary for the economy and could negatively impact leveraged financial markets.

David Kelly, JPMorgan Asset Management's chief global strategist, argues that US inflation is disinflationary and not sticky, despite the in-line July CPI report. He attributes current inflation to supply-side shocks and policy decisions, not a wage-price spiral, and believes the Federal Reserve should pause rate hikes to avoid harming leveraged financial markets.