Monday, September 19, 2016

Accelerated CPI: Another Annoying Data Point For The Fed

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*CPI and PCE have tracked closely.
*CPI though had a strong number and can bother the Fed. Most don't expect a hike but the Fed was already divided ahead of CPI.
*A surprise hike would hit markets.

CPI accelerated in August. PCE and CPI track each other although the Federal Reserve considers PCE's Price Index as its main inflation gauge. That said, without the luxury of another PCE report CPI could act to bother an already divided Fed to consider a rate hike. A surprise rate hike would crash markets (NYSEARCA:SPY)(NASDAQ:QQQ).
CPI and PCE have tracked closely. Let's see.
Core CPI0.
Core PCE0.

Source: CPI Data From Bureau Of Labor Statistics, PCE From Bureau Of Economic Analysis
Except for February and June Core CPI and Core PCE were almost exactly the same month-to-month.
The Fed will likely discuss the CPI's August pickup. They will not get a PCE report until September 30th.
CPI's Strong Number Can Bother The Fed
The August CPI number can bother the Fed. Why? Even though growth is slow inflation is still at risk to picking up.

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