Oct, 12 2022
VOT Research Desk
The majority predicts that PPI will increase little again this month, but that the annual rate will decline to +8.4% from a prior 8.7%.Tomorrow’s Consumer Price Index (CPI), which will have a significant impact on how much investors anticipate the Fed’s forthcoming rate rises to be, is the most important inflation test.
Remember that the September jobs data released last Friday indicated a continuingly robust labor market with an actual decline in the unemployment rate and continued pay inflation of +5% annually.
This means that even if the CPI decreases as predicted, a Fed switch to considerably smaller rises or a stop in tightening looks extremely implausible based on one month of positive inflation data. The results from the Fed’s September meeting, which will be released today, may reveal the Fed’s tolerance for things like high unemployment or disruptions in certain financial markets.
As concerns grow among the more dovish Fed ranks that the central bank’s aggressive efforts might cause a major recession, bulls are looking for indications of discord among members.
Reiterating remarks made by other officials over the past few weeks, it’s important to note that Federal Reserve Bank of Cleveland President Loretta Mester stated her opinion yesterday that the central bank hasn’t even started to put a dent in inflation.
Mester, who is regarded as a Fed hawk, believes that by the first half of next year, the Fed’s benchmark rate will rise above the median rate of +4.6% that policymakers are presently projecting. There are already indications of diminished loan availability as the Fed keeps tightening the screws.
Notably, with rates on a 30-year loan now at +7%, mortgage lenders have increased their lending qualifications due to concerns over mounting default risks.
