Today, all eyes are on US August CPI data, with anticipation of a flare-up in inflation, primarily fueled by escalating oil prices. While broader CPI is expected to witness a surge, core CPI, which excludes volatile food and energy costs, is projected to experience moderated rise annually.
Specifically, CPI is projected to rise by 0.6% mom, a significant jump from July’s 0.2% mom. It would mark an annual inflation rate of 3.6% yoy, up from the previous 3.2% yoy. On the other hand, Core CPI is anticipated to grow by 0.2% mom, translating to year-on-year rate of 4.3% yoy, deceleration from prior 4.7% yoy.
Fed fund futures are decidedly leaning towards a Fed hold next Thursday, with 93% probability of federal funds rate being unchanged at 5.25-5.50%. There’s just over a 50% chance that interest rates will remain at this level by the year-end. Predictions for the initial rate cut before next June stay under the 50% mark.
Further, a recent Reuters poll showcases the dominant stance among economists, with a whopping 95% (or 94 out of 97 economists) foreseeing a hold by Fed in the forthcoming week. Only one-fifth of the economists (17 out of 97) foresee at least one additional rate hike by the close of this year. Out of 87 economists who projected till mid-2024, 28 anticipate the first rate cut to materialize in Q1, while 33 expect it in the following quarter.
