Investors are paying close attention to any reading on inflation these days, and the consumer price index will be the big one to watch in the coming week. The latest snapshot of the economy comes just a week before the Federal Reserve's important September meeting. At that meeting, the Fed is expected to discuss more details about its plan to taper down its bond buying program, or quantitative easing. Market professionals say a hotter inflation reading could speed up the Fed's plans to slow the $120 billion a month in bond purchases. The paring back of its asset purchase program would be the Fed's first major step away from the easy policy it put in place to combat the pandemic. The consumer price index is expected Tuesday, and there is retail sales data is released Thursday. They are expected to show consumer prices jumped at a 5.3% annual pace in August, according to the consensus estimate from FactSet, while the consumer continued to pull back from the high spending levels of earlier in the year."If the CPI is hotter than expected, it could make the difference between a September announcement for tapering or waiting to November," Bleakley Advisory Group chief investment officer Peter Boockvar said. Economists expect CPI to rise at a 0.4% pace month over month. The report comes after August's producer price index — which was released Friday — showed a jump of 8.3% year over year, due in part to supply chain constraints. The Fed's formal announcement about tapering its bond-buying program, also called QE, is widely expected in November or December. Many of those who had expected a September announcement pushed back their time frame to later in the year after August's employment report showed just 235,000 jobs added, about 500,000 less than expected."Certainly the trend has been for the inflation number to come in above expectations. I think if that happens again, it will feed the narrative that high inflation is going to stick. Obviously, it's an issue for the bond market if it's viewed at all as accelerating the timing of the QE tapering, and or accelerating the timing of the first rate hike," CIBC Private Wealth U. S. chief investment officer David Donabedian said. That would be a negative for stocks."If markets have an inflation mutiny here and there's volatility as a result, they could move it up to September," Donabedian said of the Fed's taper announcement. "But I think there's kind of a one in four likelihood in my view."That combination of higher inflation and slower spending, particularly after August's weaker jobs report, has spurred talk about the threat of stagflation. Those worries have also increased as economists ratchet back growth forecasts for the third quarter to a still high level just above 5%, from above 6%."I'm more about the 'flation' side of it than the 'stag.' I think the economy is going to perform fine right through next year," Donabedian said.
All data is taken from the source: http://cnbc.com
Article Link: https://www.cnbc.com/2021/09/10/markets-brace-for-hot-consumer-inflation-report-in-the-week-ahead.html
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