Inflation on the rise again? Keep an eye on tonight's heavyweight CPI data for August in the United States!
The Federal Reserve expects what kind of CPI? According to FactSet, economists forecast a 3.6% YoY increase in US CPI in August, up from 3.2% in July. Economists anticipate that the MoM core inflation rate in August will rise by 0.2%, remaining unchanged from July.
At 20:30 Beijing time, the US released the CPI report for August.
According to economists' general predictions, the inflation rate in August rose slightly due to higher gasoline prices and strong housing costs, but the growth rate of core CPI continued to slow down.
The Federal Reserve will hold a monetary policy meeting on September 19th to 20th. Economists believe that a report in line with expectations will encourage the Fed to maintain interest rates at the current level.
Overall inflation in August will rise
FactSet shows that economists expect the US CPI to have an annual rate of 3.6% in August, up from 3.2% in July.
This will mark the second consecutive month of rising overall inflation. Economists predict that the overall inflation rate in August will increase by 0.6% compared to July's 0.2%.
Core CPI, which excludes volatile food and energy prices and is considered a better indicator of underlying price growth, is expected to remain stable in August.
Economists predict that the month-on-month core inflation rate in August will rise by 0.2%, the same as in July, and the annual rate of core CPI will drop from 4.7% in July to 4.3%.
What CPI does the Fed expect?
Andrew Patterson, Senior Economist at Vanguard, said that a 0.2% monthly rate would help Fed officials "feel confident about achieving their 2% annual inflation target."
This should keep interest rates at the level of 5.25-5.5% at the upcoming meeting, which is widely expected by investors.
According to CME's FedWatch tool, as of Tuesday afternoon, investors expect a 93% chance of no rate hike in September.
For the Fed, the more important question is where the sustained inflationary pressures are coming from.
Alex Pelle, US economist at Mizuho Securities, pointed out that rising energy prices will drive up the overall index. "The longer energy prices continue to rise, the greater this risk becomes." Another major factor may be housing costs, which contributed over 90% to the overall index growth in July.
Citigroup economists, led by Andrew Hollenhorst, stated, "In our view, the upcoming strong inflation data and the accumulation of upward inflation risks next year, even if the Fed does not raise rates in September, they will do so for the last time in November."