**As seen in Risk In The Week report 09/22/23, subscribe at cablefxm.co.uk/reports
The Fed’s preferred measure of inflation rebounded in July as it accelerated to 4.2% Y/y from a prior 4.1%, this was in line with expectations. August headline and core consumer prices rose at a faster pace than the prior month, the latter came in at 0.3% M/m vs estimates of 0.2%. The figures helped to concrete expectations of further Fed tightening. We recently heard from the Fed, and the September SEP saw the median dot plot projection unchanged for this year while it was lifted by 50bps for 2024. Projections for the 2023 PCE core deflator were revised lower to 3.7% from 3.9%, the metric is seen above the Fed’s price target across the horizon. Some desks point to an increase in the PCE inflation given the rise in oil prices, however, core inflation is expected to remain unchanged from prior at 0.2%, and the annual figures are seen getting closer to the Fed’s target. While we could see inflation slowing down, the Fed’s economic forecast and “higher for longer” rhetoric mean that we will need to see substantial downside surprises in data for it to change its stance.
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