Fed Awaits Latest Inflation, Consumer Sentiment Data

The August CPI headlines this week’s economic slate.

The consumer price index for August headlines this week’s slate of economic data. 

Economists are expecting the government to report a 0.2% month-over-month increase in both the headline and core (excluding food and energy) CPI when it releases the latest numbers on Wednesday, September 11.

Those numbers would match what we saw last month in the CPI report for July and would bolster expectations that the Federal Reserve will make its first rate cut of the cycle a week later on Sept. 18. The CME FedWatch tool is currently showing about a 70% probability of a 25-basis point (bps) rate cut, the first slashing of the interest rate since early 2020. 

Though it may be too soon to say that inflation has been completely vanquished with the core CPI higher by 3.2% versus a year ago (the year-over-year expectation for August and the actual year-over-year number for July), the balance of risks has clearly shifted towards growth from inflation.

In that regard, there’s no major piece of economic data this week that will add clarity to the economic growth picture. 

SPY, QQQ Fall on a Mixed Jobs Report

Last Friday’s jobs report—arguably the most important indicator of the health of the U.S. economy—was mixed, giving support to both bullish and bearish views.

The SPDR S&P 500 ETF Trust (SPY) tumbled as much as 1.8% on Friday but remains within 4% of its record high. 

Tech ETFs have taken a bigger beating; after Friday’s drop, the Invesco QQQ Trust (QQQ) fell 10% below its all-time highs, putting back in correction territory.

Earlier in August, the ETF closed 13.6% below its high, while SPY closed down by 8.4% at its lowest point of the month. 

In addition to the CPI report on Wednesday, this week’s economic calendar includes the release of data on initial jobless claims on Thursday and the University of Michigan consumer sentiment index on Friday.