Preview: Tonight's July CPI Data Release Imminent, May Directly Impact Fed's September Rate Hike Decision

BlockBeats News, August 12th: The U.S. Bureau of Labor Statistics is set to release the July CPI data at 8:30 p.m. Beijing time tonight. Dow Jones Composite forecasts that the overall CPI is expected to increase by 0.1% on a monthly basis, while the core CPI is expected to rise by 0.2%. On a year-over-year basis, they are projected to increase by 3.4% and 2.5%, respectively, each dropping by 0.1 percentage points from June but still significantly above the Fed's 2% target. Currently, traders have priced in a 50% probability of a rate hike in September, indicating that tonight's data will directly impact market expectations.

RSM Chief Economist Brusuelas stated that if the data meets expectations, two consecutive months of moderate inflation readings will give the FOMC more time to observe, and the "committee will remain on hold for the remainder of the year." In June, the CPI fell by 0.4% on a monthly basis, with core CPI remaining flat, primarily due to the decline in energy prices and a slowdown in housing costs. If the data exceeds expectations, the situation will quickly change.

Bank of America predicts that if the Fed's key inflation gauge averages a 0.25% increase over the next two months, a rate hike in September is almost certain; if the average increase is below 0.2%, the rate hike may be postponed; if it is between 0.2% and 0.25%, the September decision will be a toss-up.

At the July FOMC meeting, three members voted in favor of an immediate 25-basis-point rate hike, and Governor Brainard recently stated that if the inflation data does not cooperate, she would see a need for a rate hike. The market also anticipates a higher likelihood of a rate hike in October or December. The ultimate path will still depend on Powell's policy direction—whether he is truly willing to pull the rate hike trigger, or if the dovish stance he took at the July press conference better represents his policy.