CPI preview: Significant chance that core CPI sets a new high, burying hopes of a near-term Fed pivot

Key points:

• Despite continued falls in gasoline prices, YoY headline inflation is likely to remain at high levels in September on account of a relatively low prior year comparable.

• Core CPI, which is heavily exposed to lagging/smoothed rental data, has a significant likelihood of recording a new YoY peak in September for the current high inflation cycle.

• The combination of these factors is likely to bury any market hope of a near-term Fed pivot.

The current inflation is marked by widely different price changes within key categories

In previewing the US’ upcoming September Consumer Price Index (CPI) report, it is critical to first note that the US’ current high inflation has been marked by widely different price changes amongst different CPI categories.

A key driver of this has been the nature of the COVID pandemic, and its associated lockdowns and movement restrictions. This meant that the surge in demand from stimulus measures and the associated increase in the money supply, was extremely …