Friday’s US inflation report could be particularly important as expectations for the Federal Reserve’s next move have shifted considerably.
Markets had previously expected the Fed to leave rates unchanged in September. However, Chair Kevin Warsh’s Jackson Hole speech strengthened expectations that a rate hike could be considered, making the latest inflation figures particularly relevant for the US dollar and US equity indices.
US Inflation Rate
Friday, 11th September at 15:30 GMT+3
Market Expectations
- Headline CPI (YoY): 3.4% (previous: 3.4%)
- Headline CPI (MoM): 0.4% (previous: 0.1%)
- Core CPI (YoY): 2.4% (previous: 2.5%)
- Core CPI (MoM): 0.2% (previous: 0.2%)
What Surprised Markets Last Time?
- All four CPI readings came in line with expectations.
- Annual headline inflation slowed for a second consecutive month in July, easing to 3.4% from 3.5%, while core inflation fell to 2.5% year-on-year, its lowest level in five months.
- On a monthly basis, headline CPI rose by 0.1%, while core prices increased by 0.2%.
- The data eased some concerns about more aggressive monetary tightening, with traders reducing expectations of an immediate Fed rate hike.
- However, the US dollar’s initial decline proved short-lived.
Price movement during the first 15 minutes after the previous release (high/low):
Potential Market Scenarios
Bullish USD / Bearish US Equity Indices
- Stronger-than-expected inflation could reinforce expectations of a September Fed rate hike.
Bearish USD / Bullish US Equity Indices
- Weaker-than-expected inflation could reduce expectations of a September rate hike.
Mixed Outcome
- Conflicting signals across headline and core CPI could leave expectations for the September Fed decision uncertain, potentially leading to volatile and mixed price movements.
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