At his press conference last month, Powell highlighted four key economic data reports and today we’ll be getting to the second one. And this is perhaps arguably the most important one considering that next month’s consumer inflation report will come at a time when we are observing the Fed’s blackout period.
The expectation is that we will see a monthly increase in CPI of around 0.2% – both for the headline and core readings. That will translate to a 3.3% estimate for headline annual inflation (vs 3.0% previously) and 4.8% for core annual inflation (vs 4.8% previously).
Adam put out a good preview on the market reaction and what to expect in his post here.
And as he noted, despite the fact that markets have the capacity to brush aside any higher inflation readings, there is a sense that economic jitters are starting to come back.
The price action in US stocks yesterday was quite telling as the dip buying gave way to a late round of selling. That saw tech stocks in particular get hurt the most with the Nasdaq ending over 1% lower.
There is once again some early optimism today but I’d wait on the US CPI report later to really think about it lasting through the day. I have a feeling that this time around, a decent beat on the inflation numbers could really do a number on risk trades after the kind of start we are seeing in August.