Market focus turns to US CPI on Tuesday where still-solid increases should leave the September meeting 'live' (headline: CPI UBS US Economics 0.41% vs. UBS Big Data 0.42% and consensus 0.38%; core CPI: UBS US Economics 0.18% vs. UBS Big Data 0.25% and consensus 0.26%). While UBS economists see core CPI dipping to 4.1% in August, from 4.3% in July, they expect a rise to a peak of 4.5%-5% in early 2022.
Building price pressures from factory gate to consumers suggests central banks will need a somewhat sharper slowdown in activity than already seen to stop the process of removing extraordinary monetary accommodation. This dynamic helps explain why the broad-based USD has rallied over the past week, while US equities have traded weaker.
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