CPI DAY: INFINITYHEDGE

Median Forecast:
*headline: 0.38% vs 0.07% M/M prev.
*headline: 3.4% vs 3.4% Y/Y
*Core CPI: 0.22% vs 0.22% M/M
*Core CPI: 2.4% vs 2.5% Y/Y

Core MoM read:
> 0.25%: hot
0.20 to 0.25%: in-line
< 0.20%: cool

*Nomura: ..pace of increase in consumer electronic prices appears to have slowed in Aug... This suggests inflationary pressure from global shortages of semiconductors was limited.

*Citi: we expect our forecast for 0.18%MoM increase: the yoy reading falling to 2.3% will be a clear enough slowing in inflation that Fed officials will leave rates unchanged.

*GS:
- Looking beyond Aug, we expect monthly core CPI increases of around 0.2% for the next couple of
months, reflecting the continued slowdown in the shelter categories and shrinking contributions from tariff related price increases, though risks are tilted to the upside if disruptions to oil markets and associated oil
price increases prove more persistent than expected.
- upcoming PCE changes: Recent methodological changes mean that (1) the portfolio management PPI is no longer an input into the PCE calculation, (2) the PPIs for data processing services & videogame software will now be combined with the CPI software & accessories component to construct PCE software & accessories, and (3) the PPI for legal services will replace the CPI for legal services as the source data for PCE legal services. The medical services and domestic passenger airfares components in the PPI report will still be relevant for PCE tracking.

*BE expects headline inflation at 3.4% yoy, while the core metric ticks down to 2.4% — leaving central bankers US Core CPI to Fall to 2.4%, Lowest Since 2021 this month.

*A majority of economists see the Fed holding rates steady at this month’s meeting & through the end of 2027, even as market odds for a rate hike have increased, acc. to a BBG survey. [polled Sept. 4-9]

*About 70% of economists, 65 of 93, in the Sept 4-9 RTRS poll expect the rate to remain in the 3.50%-3.75% range next week. That reading is down from 90% in Aug.

*Traders price about 70% chance for hike

*Equity markets will most likely be driven by bond yields & oil prices for the next coming days. There is no panic at the moment, but one can feel some concerns rising on second-round inflation even if we’re not there yet" (Raphael T)

*Houthis have seized control of Mayun Island & completed their control of the Bab al-Mandab Strait, threatening deeper disruption to a second route for shipments from the Middle East.

*UAE revises AI data center plan after Iranian attacks, Originally envisaged as a 10-square-mile campus in Abu Dhabi, the project will ‌now likely comprise a network of data centers spread across the UAE (Musk Take Note): infinityhedge

*A soft number on Friday would validate Fed staff projections that monthly inflation readings should decelerate to levels consistent with 2% inflation now that tariff effects have worked through the system. A hot number would say the opposite—that the summer’s improvement didn’t stick—and leave Warsh little room to hold.

[economists expecting a hold vs traders pricing a hike]

Rate HIKE OR Hawkish HOLD.