US CPI likely to rise to 3.4%

August 10, 2023 (MLN): The upcoming U.S. consumer price index data due today at 05:30 PST will likely show a rise in both overall and underlying inflation rates, which could have a significant impact on policy decisions in the near future.

The YoY CPI is expected to rise to 3.3-3.4%, similarly, the MoM is also expected to record a significant increase of 0.4%.

To note CPI in the last month was 3% YoY and 0.2% MoM.

Moreover, core CPI is expected to rise to 4.9% YoY and 0.4% MoM.

In the last month, core CPI inflation fell to 4.8% (below 5% for the first time since Dec 2021) and 0.2% MoM.

Today’s CPI data is pivotal for policymakers for the next meeting.

The Fed faces a tough decision in its next meeting, as it weighs the risks of a recession against the persistent high inflation.

To recall, the U.S. Federal Reserve in its last meeting raised interest rates by 25 basis points to 5.25%-5.5% in a unanimous decision, bringing the benchmark funds rate to its highest level in 22 years.

This was the 11th increase in the last 12 meetings.

Market consensus expects CPI of around 3.4% YoY, up from the last month’s 3%.

Markets cheered last month’s YoY number of 3%, however, it is worth noting that it was only this low because it was compared to the peak of 9.1% in the same month last year. This is what economists call “base effects”.

In the upcoming months, inflation is expected to climb back towards the mid to high 3% range.

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