US CPI inflation came in above market expectations. The headline reading came in at 3.7% y/y against expectations of 3.6% y/y. Monthly we had a reading in line with expectations of 0.6% m/m. The core fell in line with expectations to 4.3% y/y, but at the same time the monthly was above expectations, up 0.3% m/m. But does this change the Fed's stance?
Other details of the report:
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Create account Try a demo Download mobile app Download mobile app- Housing costs (shelter) rise 0.3% m/m, with the previous increase of 0.4% m/m. On an annual basis, this is an increase of 7.3% y/y against the previous 7.7% y/y. This data will certainly be welcomed by the Fed
- Real weekly payrolls -0.1% against 0.0% previously Service inflation excluding rent and housing cost 0.5% m/m against the previous 0.2%. This, however, may be due to one-time factors
- The increase in monthly inflation was the result of fuel and electricity. Energy prices rose 5.6% m/m, and the price of gasoline alone rose 10.6% m/m
The market has reduced its expectations for a hike in September, but sees chances for such a move in December. Much will depend on whether inflation starts to slow down again, and many factors say it could rebound at the end of the year. In today's report, we didn't actually learn any data that could change the decision on the part of the Fed. There is a good chance that it will be to hold interest rates (as in June(, although at the same time leaving a wicket for possible hikes later. Nevertheless, it is not out of the question that the dollar will remain strong until next week's Fed decision.
Shelter still with the largest contribution to inflation. The rest of services are holding up quite strongly, with increases in transportation costs or eating out. Quite a drop on the part of used cars, but fuels will soon stop having a negative contribution to annual inflation. Source: Bloomberg Finance LP, XTB
