U.S. Inflation: Is The Elusive Peak Finally Here?

XM Group | Aug 09, 2022 10:31AM ET

Following

last

week’s

blistering

jobs

report

out

of

the

United

States,

investors

will

be

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turning

their

attention

to

Wednesday’s

July

inflation

figures

as

bets

of

a

75-basis-point

rate

hike

in

September

are

back

on.

However,

this

time

round,

the

CPI

data,

due

at

12:30

GMT,

might

break

with

recent

tradition

and

point

to

some

cooling

of

price

pressures.

But

what

would

a

soft

inflation

report

mean

for

the

Federal

Reserve?

The

US

dollar’s

post-NFP

bounce

back

could

be

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undone

if

the

numbers

show

that

inflation

has

likely

peaked.
Is

the

US

in

recession

or

not?

A

technical

recession

is

defined

as

two

consecutive

quarters

of

contraction

in

economic

output.

So

if

the

GDP

data

is

to

be

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believed,

the

American

economy

is

already

in

recession.

However,

other

indicators

such

as

for

consumption

and

employment

suggest

that

the

economy

is

still

growing.

Even

forward-looking

data

like

the

PMI

surveys

point

only

to

a

slowdown

and

not

a

full-blown

recession

and

the

Fed

seems

to

agree.

However,

a

stronger-than-expected

set

of

inflation

data

that

comes

hot

on

the

heels

of

the

stellar

jobs

report

could

help

the

pair

break

above

the

50-day

MA

and

have

another

attempt

at

hitting

the

140

level,

which

it

failed

to

do

in

July

when

the

rally

stopped

at

139.39.
Inflation

expectations

matter

too

If

the

CPI

and

PPI

numbers

fail

to

provide

much

clarity

on

where

Fed

policy

is

headed,

investors

will

get

another

chance

to

gauge

price

pressures

on

Friday

from

the

University

of

Michigan’s

consumer

sentiment

survey.

Last

month,

consumers’

one-

and

five-year

inflation

expectations

measured

by

the

survey

eased

slightly,

adding

to

the

growing

momentum

behind

the

view

that

the

US

is

past

peak

inflation.

A

lot

is

riding

on

the

August

readings

to

confirm

the

downward

trend

in

inflation

expectations.

Written By: XM Group

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