Analysts are predicting inflation will be shown to have moderated when the Bureau of Labor Statistics releases its Consumer Price Index at 8:30 AM Tuesday. Predictions are for it to show inflation rose 8.1% year over year, according to Bloomberg estimates.
Experts also predict it will show a 0.1% decline in prices from July to August, marking the first such monthly decline since May of 2020.
Annual headline inflation is expected to show another decline, after reading flat between June and July.
Core CPI, excluding volatile food and energy is expected to be up 6.1% year over year, which will be 0.2% greater than July’s 5.9% increase. The Federal Reserve gives more weight to Core CPI, viewing it as a better measure overall of how the economy is actually moving, given its more focused attention in inputs like housing. By contrast this year, the CPI has been far more volatile, moving alongside the price of energy.
The Fed’s next policy announcement is presently scheduled for September 21st, where experts expect to see a third consecutive 75 basis point hike in the Fed funds rate. CME Group data shows markets pricing in a 90% chance of a 0.75% rate hike, up from 69% two weeks ago.
The jump was precipitated by a raft of more aggressive statements out of policymakers, especially Vice Chair Lael Brainard, who last week said: “While the moderation in monthly inflation is welcome, it will be necessary to see several months of low monthly inflation readings to be confident that inflation is moving back down to 2 percent.”
He added, “Monetary policy will need to be restrictive for some time to provide confidence that inflation is moving down to target. We are in this for as long as it takes to get inflation down.”
Fed Chair Jay Powell reiterated his statements at the Fed’s Jackson Hole conference recently when he said the Fed will not stop raising rates, “until the job is done,” bringing inflation under control.
Federal Reserve Governor Chris Waller said at an Austrian conference recently, “I expect it will take some time before inflation moves back to our 2 percent goal, and that the FOMC will be tightening policy into 2023. The policy rate will have to move meaningfully above this neutral level to further restrain aggregate demand and put more downward pressure on prices.”
Jon Maier, Chief Investment Officer at Global X ETFs said Monday, “Despite better CPI numbers, we expect the Fed to continue on its path for another 75 basis point hike later this month.”
He added, “Tighter policy lags; thus, the tightening by the Fed may be working better than the numbers show, but given their intent on being aggressive, there is a good chance they may be over-tightening which will impact growth and market volatility.”
