Financial Associated Press, September 11 (Editor Xiaoxiang) Last Friday’s U.S. non-agricultural night, the expectation that the Federal Reserve will cut interest rates by 25 basis points this month has become mainstream in the current market. And whether this tilt in the "balance

Financial Associated Press, September 11 (Editor Xiaoxiang) Last Friday’s U.S. non-agricultural night, the expectation that the Federal Reserve will cut interest rates by 25 basis points this month has become mainstream in the current market. And whether this tilt in the "balance" of interest rate cut expectations will continue all the way until the Fed's interest rate meeting next week, tonight may be the last "decisive moment"...

According to the schedule, the U.S. Bureau of Labor Statistics will be held in Beijing The August cpi report will be released at 8:30 tonight.

Although the influence of inflation data has gradually taken a back seat to non-agricultural data in terms of macro factors that determine the path of U.S. interest rates, tonight, there may still be no Wall Street traders who dare to easily look elsewhere.

Although the CPI report released a week before the Fed's interest rate meeting is not powerful enough to help people lock in expectations of a 50 basis point interest rate cut by the Fed this month, as long as the data can be further lower than expected, it should at least be able to retain the 50 basis point rate. hope of a rate cut. On the other hand, if the data unexpectedly exceeds expectations, it can almost declare that the prospects for 50 interest rate cuts this month have been shattered in advance, and people can already prepare in advance for a 25 basis point interest rate cut!

So, how will the cpi data perform tonight?

Overview of U.S. August cpi data expectations

Let’s first take a look at Wall Street’s expectations for tonight’s cpi data:

After cpi returned to the “2 era” in July, institutional economists currently surveyed by the media expect that the U.S. in August The year-on-year increase in cpi is expected to fall further to .6% (2.9% in July), and the month-on-month increase is expected to be .2% (the same as +0.2% in July).

Excluding volatile energy and food prices, core CPI in July is expected to increase by .2% year-on-year and by month-on-month, both consistent with the previous month.

The picture below is a summary of the forecasts of major investment banks by Nick Timiraos of the "New Federal Reserve News Service":

It is not difficult to see that industry institutions are relatively optimistic about the decline in August's year-on-year CPI growth - 2.5%-2.6 % of the mainstream estimate, a sharp drop of 0.3-0.4 percentage points from the previous month's 2.9%, which is a relatively obvious decrease in the absolute value changes over the past month.

As for the core cpi month-on-month forecast, which may be more valued by Fed officials, this time the industry's forecast distribution for this data is very symmetrical. In the Bloomberg survey, 5 analysts expected the core cpi to increase by 0.3%, and 4 analysts expected that the core cpi would rise by 0.3%. For a rise of 0.1%, the rest of the forecasts were for a 0.2% rise.

Those with the highest core CPI forecasts (+0.3%) are BNP Paribas, pantheon, Wells Fargo and Natixis; on the other hand, the four institutions that predict core CPI increases of only 0.1% are Royal Bank of Canada and TD Securities , desjardins and helaba bank (helaba).

Where will the downward trend of inflation be reflected?

In terms of specific cpi sub-items, the fall in oil prices in August will undoubtedly continue to contribute significantly to the continued cooling of the overall cpi in the United States. Affected by recession panic and demand concerns, international oil prices fell by more than 5% last month, and domestic gasoline prices in the United States also fell significantly. It is foreseeable that the benefits of cooling inflation in this area are even very likely to extend into September - the price of Brent crude oil fell below US$70 per barrel on Tuesday.

In some other price areas that receive the most attention, the industry generally expects that rental inflation will also fall in August after rebounding in July. This would put rental inflation back on the long-expected downward trend that started in June. With housing accounting for the largest share of CPI, slower rent growth will provide some room for other service categories, such as health care and air tickets, to rebound slightly after unusual declines in July, without having too much of a impact on overall inflation. impact of changes.

"We believe that the U.S. Bureau of Labor Statistics' All-Tenant Return Rent Index (ATRR) is the most reliable leading indicator that official rent inflation is declining," Nomura economist Aichi Amemiya and others said on Sept. 5. "In addition, the supply of rental apartment buildings remains high, so the underlying trend in rental inflation is unlikely to accelerate again in the near term," the outlook said."

In the past two years, the rise in auto insurance prices has been an important reason for the rise in prices in the service industry. However, there are now signs that insurance companies may begin to slow down the pace of price increases in the next few months.

Morgan Stanley economist Diego Anzoategui In a preview of the report on September 5, it said, "Premium applications appear to have begun to slow down in July, which indicates that the premium increases submitted by insurance companies to regulators will not be that large. We expect this trend to continue, with a more significant deceleration in auto insurance growth over the remainder of the year. "

In terms of core commodities, core commodity prices fell by 0.3% month-on-month, which was the 13th month-on-month decline in the past 14 months. Among them, the price of second-hand cars dropped most significantly. Analysts currently generally expect that the overall core commodity prices in August The decline in prices and used car prices will be moderate.

Another category worth watching in the core commodity basket is clothing, which saw the largest price decline since the beginning of this year. Analysts are currently questioning whether prices will continue in August. Opinions on another decline are mixed, meaning any big swings could have a larger impact on headline inflation readings than expected, with seasonal adjustments pushing ahead at the start of the year, Employ America executive director Skanda Amarnath predicted in a Sept. 10 report. After raising the price of clothing, it is particularly likely to pose a downside risk to clothing prices in the August report.

Currently, Goldman Sachs expects U.S. core CPI to increase by 0.23% in August (the market consensus is for a 0.2% increase), and a year-on-year increase of 3.17% ( The market consensus is for an increase of 3.2%). The following chart is Goldman Sachs ’s specific outlook for each core cpi component:

How will tonight’s cpi data affect the Fed?

According to CME Group’s Fed Watch Tool, current interest rate futures Market traders predict that the probability of the Fed cutting interest rates by 25 basis points at next week's interest rate meeting is 65%, and the probability of cutting interest rates by 50 basis points is 35%.

Therefore, the role that tonight's cpi data can play is actually quite clear. : If the data is higher than expected, it will help people lock in the mainstream expectation of a 25 basis point interest rate cut next week; if the data is lower than expected, it will make the industry focus on whether the interest rate cut next week will be 25 basis points or 50 basis points. Uncertainty" has been further ignited.

Federal Reserve Chairman Powell said at the annual meeting of global central banks held in Jackson Hole, Wyoming last month that the time for policy adjustments has arrived. The biggest suspense in the industry now is that the Federal Reserve will How far will it go when cutting interest rates?

Citi economists Veronica Clark and Andrew Hollenhorst pointed out in the CPI data preview report released on September 9, In terms of the relevance of the Fed’s policy decisions, although the inflation data is positive Quickly giving way to labor market data, but with the August jobs report inconclusive, August CPI data may still have an impact

"The CPI data was weaker and pointed to the extent of rate cuts given the increasing downside risks to the labor market and economic activity. The threshold for greater is likely to be low," Citi economists said.

Wells Fargo's economics team, led by Jay Bryson, wrote in a note to clients last Friday that "another benign CPI report may give FMC members enough 'confidence' that inflation is becoming sustainable. On the other hand, if the inflation data is higher than expected, a 25 basis point interest rate cut at the September meeting is likely to become a consensus.”

In terms of market impact, Mitsubishi Japan Analysts at Lianhe Financial Group said the data was consistent with the slowdown in inflation and was crucial to supporting current expectations for a rate cut by the Federal Reserve. Strong August CPI data will not prevent the Fed from cutting interest rates next week, but such an outcome would further question the aggressive easing bets currently priced in, which in turn should create upside risks for the dollar.

Regarding the trend of US stocks tonight, Goldman Sachs listed the following potential fluctuations of the S&P 500 index under different core cpi month-on-month increases.

It is worth mentioning that, slightly different from usual, this time Goldman Sachs believes that the more the data deviates from the median market expectation (either too high or too low), the more detrimental it will be to the performance of U.S. stocks. In the past, similar forecasts from Goldman Sachs tended to believe that the lower the data, the better.

In this regard, the Goldman Sachs team explained that weak data close to expectations may be the best outcome: this will make the risk of some events a thing of the past, and stock volatility will also be slightly lower in the short term. And if the data is considered too hot or too cold, it may bring more uncertainty to the Fed's interest rate cut path or the current direction of the U.S. economy.