The Fed doesn’t obey CPI, but still, CPI sets the tone

Outlook: The big news this week will be US CPI on Wednesday and the ECB policy meeting the next day. In the US, we also get PPI, retail sales and the

this week will be US CPI on Wednesday and the ECB policy meeting the next day. In the US, we also get PPI, retail sales and the usual jobless claims. CPI was 3.2% in July after 3.0% in June, which upset some apple carts. Reuters report more of the same might be our fate this time, too, with CPI rising to as much as 3.6%.

Some folks will try to make out of the monthly core CPI, which was stable last time at the same 0.2% m/m. This can easily be put into question by the magic word “oil.” Unless we get a decent-sized drop in any or all of the various methods of measuring CPI inflation, the narrative is almost surely going to head in a hawkish direction, and that’s true even if the Fed decides on a pause in Sept.

As for the ECB decision, we get dizzy reading the demanding calls by various members for more strictness or less. It’s like watching tennis. The consensus seems to be a pause, but with hard-line-seeming rhetoric about more hikes later on, or even something like a 12.5% rate hike as a compromise. The G20 meeting in India was a bust, with a wishy-washing communique.

9/11 had heroes. Every year we replay this video about 9/11 heroes, narrated by Tom Hanks. About a half a million citizens were evacuated by boat, including ferries, a spontaneous surge of heroism. It was the American Dunkirk.

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