PPI and retail data released, with expectations exceeding forecasts once again delivering a heavy blow to the market! Inflation concerns and rate hike expectations increase!
This PPI and retail data basically negate the two optimistic scenarios I mentioned earlier. PPI proves that energy inflation has transmitted from the supply chain to the corporate side, so subsequent PCE will not be very good. Although retail data is weaker than the previous value, it far exceeds expectations, indicating that consumer inflation pressure has not eased.
If we look at last night's CPI, we could conclude that "mainly an energy shock, core inflation has not yet fully spiraled out of control."
However, combined with this PPI and retail data, it means that the price pressure caused by energy inflation is increasing, while demand remains resilient. Therefore, the risk of energy spreading to broader inflation is clearly rising, and the September PCE will not look good.
Currently, according to CME, the probability of rate hikes in October and December has not increased yet. We need to wait for the market to digest tonight's data and adjust pricing accordingly! #USCPI exceeds expectations to rise to 3.7%, PPI faces another test tonight
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