MNI US CPI Preview: Major Surprise Required For A Fed Skip

Executive Summary

• Consensus sees core CPI at 0.2% M/M in September, although there is sizeable skew toward a higher outcome and our survey of unrounded estimates sees an average 0.26% M/M.
• That’s only slightly softer than the surprisingly solid 0.28% M/M in August, but the drivers should differ.
• Core goods prices are expected to see their first monthly increase since February, largely because of stronger used car prices, whilst core services are seen moderating.
• Core services moderation is seen coming from the important rental components after two strong months as well as some volatile components, although core services ex-housing is only seen easing to 0.27% M/M.
• The strength in last week’s payrolls report has seen a 25bp cut in November as no longer fully priced, with the 22.5bp implying lights odds of a ‘skip’.
• We think pricing for near-term meetings is somewhat balanced in terms of sensitivity to surprises. However, more broadly, there could be greater sensitivity to a dovish surprise with the latest JPM Treasury Client survey showing the most outright shorts since Feb 2023.
• This is the last CPI/PPI round before the Nov 6-7 FOMC meeting. The October payrolls report on Nov 1 could be more impactful barring particularly large inflation surprises this week. 

PLEASE FIND THE FULL REPORT HERE: USCPIPrevOct2024.pdf