September 10, 2024 11:28 GMT
MNI US CPI Preview: Potential Tiebreaker For 25bp vs 50bp Cut
A report that could well settle expectations for what size cut the FOMC starts its easing cycle with on September 18th
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Executive Summary
- Consensus sees core CPI at 0.2% M/M in August after a slightly softer than expected 0.165% M/M in July.
- MNI’s survey of analysts, including multiple unrounded estimates, suggests it is firmly centered at 0.20%.
- Headline CPI is primed for a ‘low’ 0.2% M/M reading but note an almost even split between 2.5/2.6% Y/Y reading which could easily drive what appears a beat for the 2.5 Bloomberg consensus.
- We expect rental inflation and especially the smaller weighted primary tenants’ rent category to play a particularly big role this month, with analysts looking for an almost full reversal of last month’s surprise strength. We feel there could be some upside risk here.
- Analyst estimates look for CPI core services ex-housing between 0.20-0.35% M/M, i.e. at the very least matching or accelerating from the 0.21% M/M in July, but with CPI-specific categories again of prominence.
- There is almost no reasonable outcome from the CPI data to prevent the FOMC from cutting next week – but the result could be a market mover either way given lingering hopes of a 50bp cut. The default FOMC position is seen as a 25bp cut unless CPI leaves the door open to 50bp. An in-line figure would likely see implied September rates shift further toward 25bp from 32bp at typing.
- Landing in the FOMC’s blackout period, a weak report that seriously increases odds of a 50bp cut will see markets on tenterhooks for an unofficial blackout period steer, a la WSJ in June 2022 tipping a 75bp (as opposed to 50bp expected to pre-blackout) hike.
PLEASE FIND THE FULL REPORT HERE: USCPIPrevSep2024.pdf
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MNI (LONDON)
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