Key Points:
- The US consumer price index (CPI) for September will be released on Thursday.
- Inflation may remain high unless it is clear that demand is declining.
- In order for the Fed to achieve its aim of 2% inflation and release the brakes, there must be a sustained slowdown.
The US consumer price index (CPI) data for September is scheduled to be made public. The most important data release this week, and possibly this month, will be the release of the US CPI for September on October 13, 2022, at 8:30 A.M. Eastern Time.
The market will continue to speculate on whether the Fed will take a hawkish or dovish stance moving forward, as all eyes will be on the inflation numbers.
Fed officials have been speaking at various forums and are willing to raise rates again once inflation is under control. The September inflation data could give the Fed a different perspective going ahead.
Although a decline in the headline inflation rate is predicted, the market will be focusing on the core inflation data. US inflation fluctuated as follows between May and August: The US inflation rate increased from 8.6% in May to 9.1% in June before dropping to 8.5% in July and then resting at 8.3% in August 2022.
The US Fed remained aggressive and chose to raise interest rates by 75 basis points for the fourth time in a row in September, despite August’s inflation data appearing stubborn and prices appearing unwilling to fall quickly.
The forecast shows a different picture for the future. Market-implied inflationary pressures for the next two years have declined from a high of 4.9% in March to roughly 2.3%, suggesting that investors believe price pressures will weaken closer to the Fed’s target, theoretically paving the way for a dovish policy shift.
The Fed took the decision to keep fighting inflation aggressively because the August inflation statistics fell short of expectations. The Federal Reserve raised interest rates by a total of 300 basis points in 2022, and inflation may remain high unless it is clear that demand is declining.
According to José Torres, Senior Economist at Interactive Brokers, inflation may be slowing down as a result of falling demand. In order for the Fed to achieve its aim of 2% inflation and release the brakes, there must be a sustained slowdown. Unfortunately, while wages and rent continue to be the key drivers of inflation, the majority of the inflationary pressure is coming from services rather than goods.
The solid employment sector in September’s jobs data added to inflationary worries. It will be fascinating to see how the US CPI statistics for September turn out before the next FOMC meeting in November when another 75 basis point increase is scheduled.
According to Investmentals‘ specialists covering the FX market, the core rate will be 0.5%. However, because this number has been rounded, our true calculation is 0.45%. The unrounded amount is underlined to indicate that although a 0.4% MoM increase would still be normal for them, a 0.6% or higher increase would really be unexpected.
