us consumer prices (aug '17) - preview
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13 September 2017


With US monetary policy much dependent on the inflation outlook right now, a weaker-than-expected set of consumer prices numbers could further weaken convictions the Fed will raise rates again in 2017.


The US August Consumer Price Index (CPI) is forecast to rise, on average, two-tenths of a percent to up 0.3pct month on month, while the year-on-year rate seen up 1.8pct versus 1.7pct in July. The core rates are forecast at up 0.2pct month on month from 0.1pct in July, the fourth month in a row of 0.1pct increases, while year on year, the core rate is forecast to fall slightly to 1.6pct year from 1.7pct in July.


LiveSquawk News will cover the report, out on Thursday, 14 September at 1230 GMT, for both its audio and print services.


Some are attributing a rise in August to gasoline prices, and the affects of a lower dollar as they pass into retail prices. Goldman Sachs said some “special factors” were also behind its call for a 0.2pct rise in the core rate.


“A rebound in hotel pries and a price increase by Verizon account for about 0.05pp of our core forecast,” its economists said in a research note issued the day before the CPI is out.


Fed chair Janet Yellen has justified raising rates in the face of several months of benign inflationary pressures, saying one-off ‘temporary’ factors like mobile phone plans and prescription drugs were keeping prices subdued. Latelly, some Fed officials have voiced the need for more  evidence on the inflation front before thinking about further rate hikes.


JP Morgan economist Bruce Kasman said that if the inflation rate reasserts its upward trajectory, as they’re forecasting, “it would do more than validate the Fed’s current rate guidance; it would require a material market re-pricing, that would be reinforced by recognition that sustained strong global growth  and tight US labor markets were shifting the risk profile on the inflation outlook.”


Stephanie Sprague -- LiveSquawk News

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