Macroeconomics: The Day Ahead for 13 October

  • US CPI dominates light data schedule, digesting UK RICS House Price slide, Japan PPI and Swedish CPI; plenty more central bank speakers, BoE Breeden speech on non-financials leverage very topical; Italy and US debt sales; Blackrock kicks off US Q3 earnings run
  • US CPI: headline again likely restrained by gasoline prices; but core CPI set to see upward pressure from unseasonal goods price patterns, housing and sticky services; no respite for Fed

EVENTS PREVIEW

There is a light schedule of data with US CPI as the key focal point, a further busy run of central bank speakers as the formal 2-day part of the IMF/World Bank meetings gets underway and the start of the US Q3 earnings season, with Blackrock in focus in terms of the usual run of reports from financials. Aside from US CPI, there are also the UK RICS House Price Balance, Japanese PPI and final German CPI to digest, along with yesterday’s very unsurprisingly hawkish FOMC minutes. Amongst the day’s run of central bank speakers, the speech by BoE’s Executive Director of Financial Stability Breeden gets top billing amid the continued turmoil in the UK Gilt market, it is to be hoped that she is considerably better in her communication than some of her colleagues. A cursory look at the morning headlines underlines just how much pain USD strength is inflicting, above all in Asia, and looks to be very reminiscent of FX markets just ahead of the Plaza Accord back in 1985, even if politics and policymaking around the world look to be far more in a world of discord than accord.

** U.S.A. – September CPI **
As has been the case for the past two months, lower gasoline prices are likely to account for an expected modest 0.2% m/m rise in headline CPI, which would see the y/y rate dip to 8.1% from 8.3%, even if yesterday’s PPI evidenced larger than expected gains for Food prices. Core CPI is however expected to rise 0.4% m/m, pushing the y/y rate back up to its cyclical high of 6.5% y/y (vs. Aug 6.3%), with the heavily weighted but artificial (and housing market lagging) OER housing rent measure continuing to exercise upward pressure (as it will do well into 2023). There are also upside risks from core goods prices, given that downward pressure from typical seasonal price discounts are likely to be more modest than the seasonal adjustment assumes, and ongoing pressures from second-round effects in core services prices. Whatever the outcome, it is not going to shift the Fed from its pretty much unanimous view that rates need to get to 4.50-4.75% by Q1 of 2023.

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