Main Topic: U.S. inflation and the Federal Reserve's efforts to control it.
Key Points:
1. U.S. inflation has declined for 12 straight months, but consumer prices increased 3% year-on-year in June.
2. The Federal Reserve aims to reduce inflation to about 2% and plans to raise its key federal funds rate to over 5%.
3. The Fed is concerned about high inflation due to a strong labor market, rising wages, and increased consumer spending, and aims to slow the job market to control inflation.
### Summary
Former Toys "R" Us CEO Gerald Storch warned that the economy is likely to face a difficult holiday season due to persistent inflation. Other economic stresses such as rising interest rates, credit card debt, and student loans are also contributing to consumer difficulties.
### Facts
- Inflation remains sticky despite the Inflation Reduction Act that was passed a year ago.
- Sales of physical products have been declining for 11 consecutive months when adjusted for inflation.
- The July consumer price index (CPI) rose 0.2%, with prices climbing 3.2% from the same time last year.
- Pulte Capital CEO Bill Pulte suggests that the economy is in a period of stagflation with low growth and high inflation.
- Shelter costs, accounting for 40% of the core inflation increase, rose 0.4% for the month and are up 7.7% over the past year.
- Americans are spending $709 more per month on everyday goods and services compared to two years ago.
- Consumers are shifting towards value retailers in response to inflation.
- President Biden acknowledges that the Inflation Reduction Act was not solely aimed at reducing inflation but rather focused on generating economic growth.
Consumer prices in the eurozone rose 5.3% on average this month compared to last year, with core inflation easing to 5.3%, potentially increasing pressure on the European Central Bank to raise interest rates.
Bitcoin and other cryptocurrencies are experiencing a slip in price after key inflation data, causing concerns for the upcoming month of September, which has historically been challenging for Bitcoin.
Consumer prices in the US rose 0.2% from the previous month, and 3.3% annually, indicating persistent high inflation and posing a challenge to the Federal Reserve's efforts to curb it; core prices, which exclude food and energy, also increased 0.2% from the previous month and 4.2% from the previous year.
The two different inflation measures in Ireland, the Consumer Price Index (CPI) and the harmonized index of consumer prices (HICP), have started to diverge, with the HICP falling quicker than the CPI due to mortgage interest costs being included in the latter, revealing a crucial shift in the inflation dynamic as mortgage interest costs have overtaken energy prices as the main driver of inflation. Additionally, the increasing number of fixed-rate mortgage customers facing higher interest rates could keep inflation higher for longer, along with other factors such as higher food prices and ongoing rental market pressures.
Financial markets are preparing for a rebound in U.S. inflation in August, driven by higher energy prices, which could disrupt expectations of easy inflation control by the Federal Reserve.
Inflation is expected to rise in August as oil and gasoline prices increase, putting pressure on the economy and potentially leading to higher interest rates and a stronger dollar.
Bitcoin's weak performance and its potential "double top" structure raise concerns of more downside, with predictions of new local lows; however, there are indications that Bitcoin may experience a major shakeout before rebounding to "fair value" and the 200-week EMA near $25,600 may offer some optimism; debate ensues over the possibility of Bitcoin filling the $20,000 CME futures gap; liquidity levels on BTC/USD markets continue to increase, adding to bearish predictions; ahead of the Federal Reserve meeting, the United States Consumer Price Index (CPI) data release on September 14 brings potential volatility to the market and may impact crypto market expectations.
Americans are expecting high inflation to persist over the next few years, with a median expectation of 3.6% one year from now and estimates of around 3% three years from now, according to a survey by the Federal Reserve Bank of New York. This suggests that sticky inflation may continue to be a concern, as it surpasses the Fed's 2% target. Consumers also anticipate price increases in necessities such as rent, gasoline, medical costs, and food, as well as college tuition and home prices.
Investors and the Federal Reserve will have to wait for inflation to return to acceptable levels, as the Consumer Price Index report for August 2023 shows consumer prices rising at half the pace compared to a year ago, despite a jump in gas prices.
Goldman Sachs predicts that the August consumer price index (CPI) will show a 3.58% annual increase, with a decline in used car prices, higher airfares and transportation prices, and stable shelter inflation.
The latest inflation report is expected to show a steady increase in consumer prices, with economists predicting a 3.6% overall inflation compared to last year, indicating that inflation is gradually coming down but still remains above the Federal Reserve's target.
U.S. consumer prices are expected to have increased the most in 14 months in August due to rising gasoline costs, while underlying inflation is forecasted to remain moderate, potentially prompting the Federal Reserve to keep interest rates steady.
Bitcoin trades at $25,933, up 0.66% as U.S. CPI data is anticipated to show a small increase in August, driven by rising oil prices, while digital assets remain stable due to short covering and liquidity crunch, although a sustained bullish momentum is yet to be seen; meanwhile, the price of CRV token falls by 3.3% following negative events and selling pressure.
Despite a spike in gas prices, the rise in inflation appears to be easing gradually, with core prices exhibiting a slower increase in August compared to July, suggesting that price pressures are being brought under control.
Gas and housing prices continue to rise, leading to a 0.6% increase in the federal consumer price index for August and a 3.7% increase for the year, causing concerns about overall inflation and its impact on household budgets.
Despite claims by the Biden administration and corporate media that inflation is decreasing, the latest consumer price index from the Bureau of Labor Statistics shows that Americans paid 3.7 percent more for basic consumer items in August compared to the previous year.
Bitcoin and other cryptocurrencies experienced fluctuations following the release of U.S. inflation data, signaling a potential impact of higher interest rates on digital currencies.
Cryptocurrency prices remained stable as inflation in the U.S. surpassed economists' expectations, with Bitcoin trading at around $26,100 and Ethereum experiencing a slight dip of 0.5%. The Federal Reserve will consider this report, among other factors, for its upcoming interest rate announcement on September 20. While inflation has decreased since June, it still exceeds the Fed's target of 2% annually. Core inflation, excluding volatile food and energy costs, decreased to 4.3% in August compared to July's 4.7%.
Inflation in the US accelerated for the second consecutive month in August due to rising costs of rent and gasoline, with the consumer price index rising 0.6% from the previous month and 3.7% from the same time last year.
Stronger-than-expected U.S. economic data, including a rise in producer prices and retail sales, has sparked concerns about sticky inflation and has reinforced the belief that the Federal Reserve will keep interest rates higher for longer.
US wholesale prices increased at a faster pace in August, indicating that inflation remains persistent despite interest rate hikes by the Federal Reserve.
The Consumer Price Index (CPI) for this month shows that core CPI and all items CPI were slightly above expectations and accelerating, with the primary contributors to the acceleration being core services ex housing and energy, which may be a concern for the Fed. Additionally, owner's equivalent rent was a significant positive contributor to the monthly change in CPI, while used cars and trucks had a negative impact. There is potential for a re-acceleration of inflation, which could have negative implications for equity markets.
Consumers' inflation expectations have reached the lowest level since March 2021, with expectations of a 3.1% rise in prices over the next year, according to new data from the University of Michigan, signaling a positive sentiment for the Federal Reserve's fight against inflation.
Despite elevated inflation, the Federal Reserve is not expected to lower interest rates soon, causing the Consumer Price Index to rise significantly and impacting mortgage rates and home prices.
The Federal Reserve's preferred measure of inflation decreased in August, indicating that efforts to combat inflation are progressing, although there are still price growth pressures that could lead to further interest rate hikes by the central bank.
The Federal Reserve's preferred inflation indicator, the personal consumption expenditures price index excluding food and energy, rose less than expected in August, suggesting progress in the central bank's fight against higher prices.
Consumer spending in the US increased by 0.4% in August, while core inflation fell below 4.0% for the first time in over two years, potentially reducing the likelihood of an interest rate hike by the Federal Reserve.
Higher gas prices drove an increase in an inflation gauge tracked by the Federal Reserve in August, but measures of underlying inflation slowed, suggesting overall price pressures are moderating and raising the likelihood that the Fed will leave interest rates unchanged in its next meeting; however, the combination of higher gas prices and sluggish income growth may weaken consumer spending and mark a slowdown from last summer's healthy pace of spending.
Stock markets are wavering as investors anticipate another rate hike by the US Federal Reserve, fearing its impact on the global economy, however, recent inflation data suggests that inflation is declining and consumer spending is rising.
Investors in the week ahead will focus on the release of the Consumer Price Index (CPI) for September, third quarter earnings reports from companies like Pepsi, Delta, and JPMorgan, and insights from the Federal Reserve's September meeting minutes.
The Reserve Bank of India (RBI) expects consumer price index (CPI) inflation to ease below 4 percent in fiscal 2024-25 if there are no further shocks and a normal monsoon, with the central bank rethinking rate cuts only if CPI inflation remains at or below 4 percent on a durable basis.
The September CPI report is expected to show that inflation remains above the Fed's target, increasing the likelihood of a rate hike and raising inflation expectations for 2023, potentially leading to further upside risk to rates from Treasury auctions.
The upcoming Consumer Price Index (CPI) report for September is expected to show cooling core inflation despite a rise in headline inflation, with the Federal Reserve closely monitoring the data to assess whether inflation is moving closer to its 2% annual goal.
The Consumer Price Index (CPI) report for September 2023 is expected to show a slow increase in prices, with market expectations forecasting a 0.3% increase in core inflation on a monthly basis and 4.1% on a yearly basis, which may lead to stronger market reactions if the figures exceed expectations. Banks such as Morgan Stanley, Goldman Sachs, and Bank of America have provided their predictions for the upcoming CPI report. Analysts suggest that if the core CPI exceeds 0.1% on a monthly basis, it could lead to a decline in the stock market as it may indicate a potential interest rate hike by the Federal Reserve. This data is particularly significant as it precedes the FOMC meeting scheduled for October 31-November 1.
The U.S. government's upcoming inflation report is expected to show a cooling off of inflation, with overall prices for consumers rising by 0.2% compared to August and 3.6% compared to a year ago, and core inflation expected to be up 4.1% from September last year, indicating slower price increases in September than in August.
The upcoming monthly inflation report is expected to show that inflation in the US is cooling off, with overall prices for consumers rising by 0.2% compared to August and 3.6% compared to a year ago, indicating slower price increases in September than in August. However, if the report reveals that inflation remained higher than expected, especially in core areas, it may prompt the Federal Reserve to raise interest rates again, further slowing the economy.
