Higher CPI but rate will be unchanged in Sept. FOMC?

2023-09-13

US headline CPI in August is 3.7% year-on-year, after rising by 3.2% in July; US core CPI growth in August is 4.3%, down from 4.7% in the previous month.

CPI tonight will set the tone for the US dollar and risk assets in general the near term.

CPI estimates from major institutions

Energy-related segments push up CPI

The expected increase in oil prices drives most of the headline CPI growth.

The Bureau of Labor Statistics cites

rent, owners' equivaalent rent, motor, vehicle insurance, medical care, and personal care as pushing up core.

Lodging away from home, used cars and trucks, and recreation pushed it down.

Supercore CPI edged up on a monthly basis, the second straight increase. The Fed focuses on this number for a more "true" reading of inflation. In August, transportation services were the biggest contributor.

There is a big turn-around in airline fares.

Interest rate will be unchanged in September

Fed pays attention to core CPI and services inflation other than housing, which is closely related to the job market. Oil prices surge may not affect rate hike decision.

With hotter headline CPI and declining core CPI, CME's FedWatch tool indicates the market estimates about a 93% likelihood that the Fed will keep interest rates unchanged at the policy meeting on September 20th.

The market might be volatile tonight but won’t drop much as there are no more surprises in August CPI. $10-YR T-NOTE - main 2312(ZNmain)$ $S&P 500(.SPX)$

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Comments

Universe宇宙
2023-09-14
Universe宇宙
@TigerGPT Second wave of inflation and much stronger than the one seen in the Paul Volcker era is coming?
- TigerGPTReplyUniverse宇宙:
  Based on the available information, it is difficult to predict the likelihood of the Fed keeping interest rates unchanged at the policy meeting on September 20th. However, recent statements from Fed Chair Powell suggest that the Fed is prepared to raise rates further if necessary to combat high inflation. As for the market reaction to the CPI release tonight, it will depend on whether the actual CPI figure meets, exceeds, or falls short of market expectations. If the CPI figure is higher than expected, it could lead to concerns about inflation and potentially cause the market to react negatively. On the other hand, if the CPI figure is lower than expected, it could ease concerns about inflation and potentially cause the market to react positively. As for whether a second wave of inflation is coming, it is difficult to say for certain. However, some experts have expressed concerns about the potential for sustained inflation due to factors such as supply chain disruptions and labor shortages.
  Reference articles：
  Fed Chair Powell calls inflation 'too high' and warns that 'we are ...
  The next phase of the Fed's historic inflation fight is waiting for ...
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- TigerGPT:
  Based on the latest CPI data, the US dollar and risk assets may be affected. The higher-than-expected core inflation for August has increased the likelihood of a Fed rate hike being back on the agenda. Even if the Fed were to skip a policy rate hike at next week's meeting, it will seek to inform markets that further hikes remain an option and reinforce the higher-for-longer mantra attached to its recent commentary. The Fed's focus on inflation is to keep it at a moderate level and maintain price stability. The surge in oil prices may affect the rate hike decision, but it is not the only factor that the Fed considers. As for the September FOMC meeting, it is uncertain whether the interest rate will be unchanged or not.
  Reference articles：
  Core CPI Fell & US Market Gains & Apple Fell.
  U.S Core Inflation Data Has Likely Raised Possibility of Another Fed Rate Hike -- Market Talk
  U.S. stocks finish mostly higher in volatile session after CPI data shows inflation ticked higher in August
  Higher CPI but rate will be unchanged in Sept. FOMC?
  Is the US CPI data pointing to higher rates?
  Lingering U.S. Inflation Fears Leave A Final Rate Hike On The Table
- TigerGPT:
  Based on the information available, it is difficult to predict whether a second wave of inflation is coming and whether it will be stronger than the one seen in the Paul Volcker era. However, some experts believe that there are good reasons to expect inflation to be both structurally higher and more volatile over the next decade. The US is less vulnerable to energy shocks than in the 1970s, but further gas price spikes are possible, and that could prompt renewed waves of eurozone inflation. It is important to keep an eye on the inflation rate data of the country in question to monitor any changes.
  Reference articles：
  Inflation's Second Wave: Are We Really Watching A '70s Rerun?
  July CPI Preview: The Second Wave Of Inflation Approaching
  Inflation's Second Wave: Are We Really Watching A '70s Rerun?
  Chart Book: Tracking the Recovery From the Pandemic Recession
  Inflation’s second wave: Are we really watching a 70s rerun? - FXStreet
- TigerGPTReplyUniverse宇宙:
  I'm sorry, but I cannot provide an answer to your question as the date you mentioned, September 14, 2023, has not yet occurred.
- TigerGPTReplyUniverse宇宙:
  I'm sorry, but I cannot provide an answer to your question as the date you mentioned, September 14, 2023, has not yet occurred.

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