US CPI Prep

On Wednesday the 11th of September, at 08:30 ET, the BLS is set to release the latest US CPI report for the month of August.
Here are some views on what to expect.

Overview
For US CPI YoY, the median forecast is 2.5%, from the prior of 2.9%.
According to a survey of 43 economists, the highest estimate is 3.2%, and the lowest is 2.4%.

For US CPI MoM, the median forecast is 0.2%, from the prior 0.2%.
The highest estimate is 0.3%, the lowest is 0%.

For US Core CPI YoY, the median forecast is 3.2%, unchanged from the prior 3.2%.
The highest estimate is 3.2%, the lowest is 3%.

For Core CPI MoM, the median forecast is expected to remain unchanged at 0.2%.
The highest estimate is 0.3%, the lowest is 0.1%.

Here are the views from some of the largest investment banks’ forecasters

General Expectations
Going into this release, we must be mindful of the state of employment in the US currently.
This has been mentioned by various Fed members and is being closely watched, as such, the Federal Reserve are eager to begin the cutting cycle which must be considered when predicting the market reactions from CPI.
Higher Than Expected
If US CPI were to come in higher than expected, you could see rate futures pricing in fewer bps of cuts this year than seen before the data.
This might send indexes down, as this, paired with cooling employment, would be a sticky situation for the US economy and tough for the Fed to navigate safely through.
The US Dollar could see strength as higher for longer rates tend to attract foreign investment, increasing the demand for and value of the currency. Bond yields would most likely follow the Dollar higher whereas prices may fall.
As Expected
If the data were to come in as expected, it would be probable to assume the markets would have a muted reaction, as this would have been priced in already, however, you must be wary of the contents of the report, as hidden details may sway the sentiment toward the release.
Lower than expected
If CPI came in lower than expected, you could see index strength and changes to the times of rate cuts and perhaps, the amount seen in 2024. In turn, Dollar weakness would be a likely outcome in this scenario, along with bond yields lowering.

Commentary
Bank of America
We expect the August CPI report to continue the good news on inflation as we look for headline and core to rise 0.2% m/m.
Beyond August, we think that upside risks to inflation have diminished owing largely to the cooling labor market.
The data should strengthen the case for a September cut.
Going forward, we think that activity and labor market data will be more important determinants of the pace and depth of the cutting cycle than inflation.

Wells Fargo
Consumer price inflation likely picked up in August in a reminder that the road to restoring price stability will still have some bumps along the way.
We estimate the core index rose 0.25%, which would still be less than the average increase in Q1 that set back the clock on expectations for Fed easing and would keep the year-over-year rate of the core unchanged at 3.2%.
Headline inflation for August will likely offer further evidence that through the month-to-month moves, inflation’s progress is not going into reverse.
We look for a 0.2% increase in headline CPI that would bring the year-over-year rate to 2.6%—the smallest increase since the pandemic’s one-year anniversary in March 2021.
Headline inflation for August will likely offer further evidence that through the month-to-month ups and downs, inflation’s progress is not going into reverse. We expect the overall CPI to increase 0.2% in August (0.19% unrounded), which would push the year-over-year rate down to 2.6%—a level not seen since March 2021.
An unusually large drop in gasoline prices this past August points to an outright decline in energy costs.
Food inflation looks to have been little changed as a rebound in price growth for food away from home was likely offset by softer grocery inflation.

UniCredit
We expect both headline and core CPI inflation to rise 0.2% MoM in August, with the risks skewed to the upside.
To two decimals, we see core inflation rising 0.22-0.25% after 0.17% in July, 0.06% in June and 0.16% in May.
The Fed is likely to still see this as progress after very good progress in the prior three months.
In year-on-year terms, the headline rate would likely fall to 2.6% from 2.9%, while the core rate would probably remain unchanged at 3.2%.
Gasoline prices are likely to add 0.06pp to monthly headline inflation, partly offset by a downward contribution from utility prices.
Core goods prices could rise, reflecting a rise in used car auction prices and higher shipping costs.
Rent inflation likely slowed after surprisingly jumping in July.
Non-housing core services inflation likely was only moderate, reflecting slowing services activity and wage growth.

Deutsche Bank
Our expectations are for headline (+0.20% forecast vs. +0.15% previously) and core (+0.23% vs. +0.17%) CPI to post similar monthly gains.
Should our expectations hit the mark, the year-over-year growth rate of headline CPI would drop 30bps to 2.6%, while that for core would remain steady at 3.2%.
Shorter-term trends for core would be more positive, with the three-month annualized rate remaining below 2% (1.9% vs. 1.6% in July) and the six-month annualized rate falling by 20bps to 2.6%.
Given the surprise spike back up in rental inflation, much of the focus will be on whether or not July was an anomaly.
While several regions saw rents accelerate in July, the increase was most striking in the West, particularly in the larger cities.
In addition, the move in primary rents was magnified by seasonal factors. As such, we expect August’s rent prints to be closer to their June values.
Specifically, we anticipate primary and owners’ equivalent rents to rise by 0.32% (vs +0.49% in July) and 0.30% (vs. +0.36% in July), respectively.
Other categories of note will be used vehicles, which given recent moves in wholesale prices, should begin to exert much less of a drag than in recent prior months. In addition, airfares could pick back up after an almost 10% drop over the last three months.

Previous Release
On August 14th at 08:30 ET, the BLS released the US CPI report for the month of July.
US CPI YoY came in lower than expected at 2.9%, on the forecast and the prior of 3%.
Core CPI YoY came in as expected at 3.2%, but down from the prior 3.3%.
CPI MoM came in as expected as well, at 0.2%, but up from the prior -0.1%.
Core CPI MoM also came in as expected at 0.2%, also up from the prior 0.1%.

This caused only small moves in the market, as overall, this data stack was mixed.