Week’s overview: FED, CPI and August expectations
Last week the consumer price index or CPI for the month of July was released by the United States bureau of labor statistics and it came in at 8.
5 percent. This was 0. 2 percent less than the 8. 7 percent that investors were pricing in and a full 0. 6 percent less than the 9.1 CPI print for june. This resulted in a rally across all asset classes as investors took the surprisingly low inflation reading as a sign that inflation might have peaked and that this means the federal reserve will not raise interest rates as aggressively when its officials come back from their break in September.
For anyone unaware the fed’s rate hikes are what has been causing the crypto market to collapse since november and if you have read about the fed’s most recent press conference you’ll know that the interest rate rhetoric alone is enough to cause markets to crash.
You’ll also know that the fed will continue raising rates until its officials are confident that inflation is headed back for the institutions.
2 target consider for a moment that the US is still a full 6.5 percent above this target even with the latest inflation reading.
This is why many experts are cautioning that the fed’s aggressive rate hikes are not done yet and on friday one of the fed’s officials explicitly stated that so long as inflation remains at these levels, quote – “we’re just going to have to continue to move rates into restrictive territory”.
This same official also specified that he and his constitutions would quote “like to see inflation running at our target which is two percent at the pce”.
For context pce is short for personal consumption expenditures. Price index the fed’s preferred inflation measure from the pce’s perspective inflation hasn’t peaked and that’s partly because the pce figures for July have yet to come out.
These are set to be released on Friday the 26th of August and if these figures come in higher then it effectively guarantees an aggressive rate hike in September. So mark your calendars and while you’re at it mark another date Tuesday the 13th of September.
This is the day that the CPI for August will be out and if it comes in cooler again then the markets will likely rally again even though the fed doesn’t pay all that much attention to the CPI when deciding on rate hikes or so they say.