By Michael Every of Rabobank
The US CPI report for August is clearly going to be the major market focus today. Expectations are 0.4% m/m headline and 0.3% core, equivalent to 5.3% y/y and 4.2% respectively. Who, especially among those saying inflation is not a problem, had a 5%+ headline figure pencilled in for this stage in the year?
As a warm-up for that report, replete with all the methodological problems covered here before, consider that the New York Fed’s own inflation survey released yesterday showed median 1-year-ahead inflation expectations increased by 0.3ppts to 5.2%, the tenth consecutive monthly increase and a new series high, and median inflation expectations at the 3-year horizon also increased by 0.3ppts to a new series high of 4.0%. Both increases were broad based across age and income groups. In other words, the public the New York Fed, the home of Wall Street, speaks to, still expects