US Consumer Prices To Slow In August

Considering the timing of the inflation data, it is quite likely that investors will look past the report. The Federal Reserve is due to meet on September 18th. The likelihood of a quarter basis point rate cut is priced in.

This comes after last week’s labor market report which came out mixed. While wages rose, the pace of jobs added during the month was weak. At the same time, the past revisions to data also remain to the downside.

Given the ongoing trade war between the US and China, it is quite likely that a surprise beat on the inflation estimates will change the Fed’s view on rates.

As a result, the inflation report could be largely ignored by market participants.

However, the underlying trends in inflation are something to look into. There is a good chance that inflation could slowly rise close to the Fed’s inflation target rate of 2.0%. The question is whether the Fed will remain patient enough for this to happen.

The central bank has come under pressure, especially from President Trump, to do more to lower borrowing costs.

Recent data covering the personal consumption expenditure or PCE showed that inflation rose by 1.4% on the headline and 1.6% on the core in July. The core PCE has been consistently below the Fed’s inflation target rate of 2.0% for the most part of 2019.

The recent patch of economic data from the US continues to give a mixed picture.

Within this context, we could, therefore, expect to see inflation to reflect the same as well. A subdued reading is perhaps only going to strengthen the conviction that the central bank will cut rates in September.

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