Key US inflation data is due on Tuesday. The August CPI print will be closely watched by market participants ahead of the next FOMC meeting on September 20-21. According to analysts at Wells Fargo, the CPI will show a 0.2% decline in August due to another drop in gasoline prices.
“Consumer price inflation surprised by decelerating in July, driven by a large drop in energy prices and a sharp slowdown in both basic goods and services. We expect Tuesday’s report to show consumers more relief on the inflation front in August. Specifically, we expect prices to have fallen 0.2% last month, which would be the largest monthly decline since spring 2020.”
“A further drop in petrol prices is expected to lead the headline down, while further recovery in travel services and used cars should help keep the core at a 0.4% month-on-month increase.
“The FOMC has been extremely focused on inflation recently, and Tuesday’s CPI print will be important in shaping the Fed’s latest thinking ahead of its next meeting. While we expect the FOMC to be encouraged by the decline in inflation since June, core prices continue to rise well ahead of the Fed’s target. Lower commodity prices in recent months and the easing of supply chain constraints point to a cooling of inflation in the coming months, but the still strong pace of labor cost growth suggests that it will not be easy to return inflation to the Fed’s target on a sustained basis. “