This week’s main focus is on the US Consumer Price Index (CPI) in August, the last significant figure for the US economy ahead of the Federal Reserve meeting on September 20-21. The inflation data was expected to have slowed in August and encouraging signs also came yesterday from the Survey of Consumer Expectations by the Federal Reserve Bank of New York. According to the August 2022 survey, consumers expect inflation to decline to 5.7% over the next year, down from 6.2% in the July survey result, and to 2.8% over the next three years, from 3.2%. The five-year-ahead inflation expectations also dropped, from 2.3 % in July to 2.0% in August.
Inflation data was closely followed to assess the Federal Reserve’s next move at next week’s meeting, where a third consecutive rate hike of 75 basis points is expected to tame high prices. Right before the data was released, the CME FedWatch Tool was showing a 90.0% probability of a 75 basis point increase, and it remained unchanged shortly thereafter.
According to the US Bureau of Labor Statistics, headline inflation slowed to 8.3% year-over-year in August 2022, down from 8.5% in July, but above the market forecast of 8.1%. Core CPI increased to 6.3% in August 2022, higher than 5.9% of the prior month and the market forecast of 6.1%. Gasoline prices dropped significantly, but other components such as food, shelter and medical care accelerated. Shortly after the release of inflation data, US stock futures dropped.
