Inflation Return

Macro Markets

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The biggest data point for the Fed after payrolls last week will be CPI this Thursday. We will have CPI released at 8:30 am on Thursday, August 10. The prior reading for June was encouraging as headline inflation rose at a 3% annual rate, and the monthly increase in core CPI was 0.2%, the smallest increase since August 2021.

Economists expect a 0.2% increase monthly, the same increase seen in June. Year-over-year growth is forecasted at 3.3%, up from 3% in June. Headline inflation, which is not adjusted for seasonal factors and includes often-volatile food and energy prices, peaked at 9.1% in June 2022. It was running at an 8.5% pace in July of last year.

Core CPI, which strips out more volatile food and energy costs, is expected to come in at 0.2% in July, matching June's figure. The annual core CPI pace is expected to slip to 4.7% from 4.8%. Core CPI peaked at 6.5% in March 2022, and one year ago, in July, the annual level was 5.9%.

This is the first time inflation is expected to rise in a while. It will be interesting to see how the market reacts. Currently, the market has priced in on the inflation side, with stocks slowing down a little on the heat. A certain pullback is expected. Read on for more details.

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