US CPI to be released at 8:30 AM. Expectations are 0.2% for MoM and 2.6% YoY

For August, US Consumer Price Index (CPI) expectations are for a

• Headlined CPI 0.2% month-over-month (M/M) change (previously 0.2%),
• Annual headline CPI rate expected to ease to 2.6% year-over-year (Y/Y) from 2.9%.
• The core CPI, which excludes food and energy prices, is also expected to rise -0.2% M/M (previously 0.2%),
• The annual core CPI rate forecasted to remain steady at 3.2% Y/Y.

Last month the headline unrounded came in at 0.1549% while the core rose by 0.1652% – both below the 0.2% rounded numbers.

Shelter inflation is expected to moderate, with owners’ equivalent rent projected to rise by 0.33% and primary rent by 0.29%. Car insurance prices are expected to continue to increase .

The core Personal Consumption Expenditures (PCE) inflation, the Federal Reserve’s preferred measure, is expected at at 2.6% Y/Y by December 2024. While disinflation is expected in the auto, housing rental, and labor markets, it could be balanced by potential increases in healthcare and car insurance costs.

Another metric the Fed will be watching is ‘supercore’ inflation, which is CPI services ex-housing. It was at 4.5% y/y last month and that’s a reminder that goods are doing all the heavy lifting in the report at the moment, in part because insurance rates take a long time to be passed on.

As far as the Fed rate expectations before the release, there is -32 basis points cuts priced in for September with -114 basis points of cuts between now and year-end. The Fed meets next week with their interest rate decision due at 2 PM on Wednesday.

This article was written by Greg Michalowski at www.forexlive.com.