The inflation rate slowed down below market expectations (according to a Bloomberg survey) – by 8.1%.
Core inflation excluding food and energy prices (Core CPI) increased by 6.3% in annualized terms (0.6% MoM). At the same time, the forecast was 6.1% and 0.3%, respectively.
These data are a signal for the continuation of aggressive monetary tightening and the preservation of hawkish rhetoric for the members of the Fed Committee. A decrease in inflation below the baseline estimates and expectations is a weighty argument for another increase in the Fed’s key rate by at least 75 b.p. at the next meeting, which will be held in a week.
The optimism in market trends that emerged after the release of inflation expectations data (a decrease in expectations from 6.22% in July to 5.75% in August) was weakened by the grim reality.
Right after the CPI data release, the Dollar Index rose from 108.22 to 109.83 points (+1.49%), and on the contrary, security futures declined, despite the steadily growing trend before the inflation statistics release. Oil prices fell to 93.5 dollars per barrel, although they increased from 88.6 to 94 dollars per barrel since the end of the previous week. Thus, the inflation data for August led to a large-scale sell-off of American stocks and an even greater diversification of the investment portfolio structure towards less risky assets.
Given the current data, the probability that a hard landing of the global economy will become a baseline scenario increases. At the same time, the global inflationary background remains strong, and pressure on the exchange rates of developing countries is increasing.