**As seen in Risk In The Week Report 09/09/22, Cablefxm.co.uk/reports
U.S. inflation slowed down in July to 8.5% Y/y from a previous 9.1%, 2pp lower than the median consensus estimate. Energy contributed by 2.4%, food contributed by 1.5%, services added by a 3.2%. The latter sees the largest contribution this cycle, up from 1.7% seen a year ago. The core figure was unchanged at 5.9% Y/y, this also missed estimated as consensus expected a rise of 6.1%, this was the first time the core figure surprised to the downside since March. If we did not round the headline month-over-month release, this would have thrown a negative reading of 0.019%, the first contraction since May 2020. On a monthly basis, energy posted a fall of 4.6%, the reading had not seen negative prints since April. Shelter increased by 0.5% M/m, slowed than the previous, airline fares fell by 7.8% and used cars declined by 0.4%. The team at Bloomberg Economics say the Fed is taking its cues from core inflation and a resilient labour market, they say that another flat monthly print would not change the Fed’s outlook. Bloomberg notes that gasoline prices are set to subtract 0.6 percentage points from the headline, as pump prices fell about 13% in August. Heading into the August inflation report, analysts at Goldman Sachs say they expect the Fed to hike rates by 75bps in September, this is an upward revision to their previous outlook of 50bp. They expect a 25bp increase in December, which would leave the federal funds target rate at 3.75%-4.0% by end of 2022. If there’s strength in the report, it could be seen in the core figure as the median estimate is projecting an acceleration to 6.1%, desks point to further strength in services and shelter components.
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