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[If Core CPI Exceeds 0.26%, a September Rate Hike May Be Back on the Agenda] ⑴ The June core CPI, released on Tuesday, is the most important macroeconomic variable this week. Market consensus expects the overall CPI to fall by 0.2% month-on-month, while a 0.2% month-on-month increase in core CPI corresponds to a year-on-year increase of 2.8%. However, if the core CPI rises by 0.26% or higher, the annual rate will rise to 2.9%, triggering the Fed's concerns about persistent inflation. ⑵ Fed Governor Waller clearly released a hawkish signal on Monday, stating that if the June core CPI continues to show inflationary pressure, a tightening of policy in the short term needs to be considered. However, a direction can only be confirmed after several consecutive months of low readings. The interest rate market has already fully priced in a September rate hike. ⑶ Currently, the market is overly focused on the mild appearance of the core CPI, ignoring the huge deviation of nearly 3.5% year-on-year between it and the Fed's preferred core PCE. AI-driven investment demand continues to support the PCE at a high level through channels such as business services, an indicator that is already within the Fed's purview. (4) Another layer of inflationary pressure is accumulating from the wholesale end: the Russian diesel export ban, high aviation fuel prices, Middle East energy risks, and attacks on Russian refining facilities will all keep transportation and logistics costs high, and the transmission of PPI to core CPI is only a matter of time. (5) Regarding US Treasuries, the 2-year yield has climbed to 4.298%, a 17-month high. The market implies a cumulative rate hike of about 45 basis points before the end of the year. However, after a significant repricing at the front end, 2-year Treasury bonds above 4.25% are already attractive for allocation. The 10-year yield is expected to be between 4.58% and 4.62%. In the short term, a range trading strategy should be maintained.