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Waiting For Inflation
"CPI eve" sessions are notoriously tedious in the 2020s.
Monthly inflation reports out of the US aren't the hold-your-breath affairs they were in 2022, but there's still enough event risk around the data to make market participants hesitant the day before. Between that and the summer lull (which is in full effect), the pre-CPI trade felt almost completely listless this week.
Outside of China's brush with deflation and a 40% surge+ in European natural gas, there were precious few notables. The
Are we waiting for the data, or algo and trader reaction to it?
Like Leibniz monads of binary 0 and 1s…..
I’m watching the housing inflation numbers.
If housing inflation goes slightly negative, even flat, then it will be very hard to have core CPI or core PCE above 3%.
Whether that happens, and if so then when, is the stuff of failed predictions. But if we do see housing inflation establish a clear downtrend, then the likelihood of core inflation getting to 3% and lower in 2024 will seem pretty high.
When core inflation is 3%, the Fed may consider FF >5% to be overly restrictive.