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CPI kicks off the US data calendar today

Another reason for the Fed to cut

The bond market and trade war is telling the Fed they should cut rates but the inflation data will determine if they can.

The recent line from the Fed has been that temporary factors have been holding inflation down. However they have stopped saying that in the past month or so and the silence might be a message. Or maybe they were right all along and low unemployment is about to kick rates higher.

The PCE report is the Fed’s main inflation gauge but CPI is the double-check. It has been running a bit higher. Here’s what’s expected today:

m/m:

  • +0.1%
  • +0.2% ex food and energy

y/y:

  • +1.9%
  • +2.1% ex food and energy

On the headline y/y reading, estimates range from +2.1% down to +1.6%. There’s room for a surprise here and every tick will be meaningful. Here’s a chart showing the distribution of estimates and a small skew to the downside:

Other events to watch today include weekly US oil inventories (the API report showed another surprise build and that’s why WTI is down 2.8%) and a 10-year auction. Fed talk is quiet due to the pre-FOMC blackout.

ForexLive

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