Markets Focused On US Inflation Report
The August CPI inflation report coming from the US is one of the most important financial data releases as the week starts. As economists debate whether the Federal Reserve will tighten its monetary policy or pause rate hikes, data included in the report is expected to play a role in the Fed’s board future decisions.
US CPI August Report
On Wednesday, it will be the moment of truth for the US economy as the Bureau of Labour Statistics (BLS) will publish the August CPI inflation report. Economists suggest that headline inflation rose by 3.6% on an annualised basis. On a month-to-month basis, they expect inflation to have risen by 0.6% in August.
The Fed's monetary policy meeting is scheduled for Sept. 19-20 so the upcoming inflation data is expected to provide clues about the U.S. central bank tightening policy.
ARM IPO Draws Attention
Market analysts have focused on the ARM IPO scheduled for September 13th. Some of them suggest that ARM’s IPO could be the biggest in the history of the US market as the company is a long-established semiconductor producer and one of the major players in the specific market. According to a CNBC report, ARM recently released new chips specifically targeted at AI and machine learning use cases. However, some analysts suggest that “Arm is unlikely to see the benefit from AI filter through to its revenue for at least three-to-five years.” For more information regarding the upcoming ARM IPO please read our blog.
UK GDP Report
On Wednesday morning, the Office for National Statistics (ONS) is expected to publish data regarding the UK’s GDP in July. Forecasts show that the UK’s economy is likely to have expanded by 0.4% in July on an annualised basis.
Earlier today, the ONS announced that the unemployment rate in the country rose by 4.3% in the three months to July. The same report showed that average earnings, including bonuses, rose by 8.5% in the same period. Salaries excluding bonuses rose by 7.8%, which is the highest growth rate since 2001.
BoE Board Member: “Overtightening better than not moving rates”
The Bank of England’s (BoE) board member Catherine Mann said that underestimating the persistence of inflation could lead to an overshoot. In her remarks, she noted: “to pause or to hold the policy rate lower for longer risks inflation becoming more deeply embedded, which would then require more tightening in total, to both change inflation itself and to wring-out the embedded inflation that comes from the sustained duration above target. This is why I would rather err on the side of over-tightening. But, if I am wrong, and inflation decelerates more quickly and activity deteriorates more significantly, I will not hesitate to cut rates.”
Mann also suggested that a “3% inflation is close enough” approach could send the wrong message to the markets.
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