Impending Inflation Number

Kaight | Aug 10, 2017 | 1,192 posts since 2011

Keep a "weather eye" tomorrow (Friday) as the Fed releases its latest inflation number. Inflation in 2017 so far has been running at roughly 1.5%, significantly below the Fed's 2% target. Too low an inflation number annoys the Fed and mitigates against an interest rate increase or Fed balance sheet unwinding.

I'm not suggesting tomorrow's inflation number will alone be determinative. But it will be influential. If inflation remains subdued the Fed will be faced, should they decide to increase interest rates or unwind, with doing so more in an anticipatory manner and less in reaction to actual events.

Personally I'm surprised the lofty stock market has not by now contributed to inflation through action of the "wealth effect". But so far such has not come to pass. The future? I have lots of stupid guesses but really no clue.

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Kaight | Aug 11, 2017 | 1,192 posts since 2011

Twitter reporting CPI has come in weak.

More here:

https://www.cnbc.com/2017/08/11/us-consumer-price-index-july-2017.html

Lifted from that piece:

"U.S. consumer prices rose less than expected in July, pointing to benign inflation that could make the Federal Reserve cautious about raising interest rates again this year."

"The modest gain in consumer prices could worry Fed officials who have largely viewed the retreat in inflation as temporary."

Kaight | Aug 12, 2017 | 1,192 posts since 2011

Heard economist Diane Swonk on radio; smart woman. She acknowledged the stuff I've already posted here, but she said the December Fed rate hike will hinge on the inflation numbers released between now and then. So I'm like, OK, based on that it is time to do some checking. Here is what I found:

The December FOMC meeting will commence Tuesday, December 12, and end the next day, December 13.

The November CPI number will be released at 8:30 am on Wednesday, December 13. Whew: close!

But I gotta figure, even without knowing for certain, the FOMC insiders will have that November CPI data the day before, at the start of their meeting, if not earlier. That's what it means to be an insider, after all. And for sure they will have the data before their December session closes; we all will.

Course if the three CPI reports released between now (July) and then (November) come in as pathetically weak as did the July report, I'm thinking we can probably kiss our December rate hike good-bye regardless the November outcome.

Not to mention all that does not even address possible rate impact of war, or September and subsequent Fed balance sheet reductions, or other stuff like maybe the stock market goes south for some reason. There is a lot going on.

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