Breakfast Bites - US CPI; UK CPI

Rise and shine everyone.

That was some PPI reading we got yesterday. Everything was topsy-turvy. While the overall numbers came in lower than expected, it wasn’t because of the usual suspects. Goods actually went up, while services came down. Energy also went up. Both these items have been the reason for a drag on inflation.

So what does this mean for the CPI release that we’re expected to get later today? Well, for one, everyone will be looking for a beat on print, i.e., coming in lower than consensus expectations. Remember we got a negative MoM print on the headline number last month.

A good sign is that services inflation may see a lower reading - the part that has been sticky. But, one thing to remember though, is that if CPI comes in too low, the market could start worrying about growth yet again and start considering that the Fed is behind the curve. This doesn’t bode well for next week’s Jackson Hole meeting, where it’s quite likely that Fed Chair Powell will be setting expectations.

A higher CPI print could also have a troubling outlook, with the market confirming that we are in stagflation and the Fed may not be able to cut. This is, however, a low-probability outcome at this stage, given what we’ve been seeing.

US Equity Futures are flat this morning, probably in anticipation of the CPI print. The Yield Curve is flattening again, with yields lower across the board. Crude oil is pulling back but, Ag and Metals are higher this morning.

Subscribe to MacroVisor Premium to read the rest.