CPI in a tariff world
- Gustavo A Cano, CFA, FRM
- 27 minutes ago
- 1 min read
Tomorrow the BLS will publish the CPI for the month of July. It is expected to go up 0.1% over June to an annualized rate of 2.8%. Anything above that will back J Powell’s decision to leave rates unchanged. In fact 2.8% will be enough. But perhaps the key conclusion we should be able to gather from this report is the impact of tariffs on the U.S. consumer. Since the headline is a mixed bag of items that follow different dynamics, we’ll need to dive into the details to see what is happening with goods inflation. In addition to that, on Friday, we’ll get the producers price index, an important part of the sequence of goods pricing that ends up being transmitted into CPI. If we get some indication that prices are rising, the long end of the U.S. treasury curve will reflect it with rising yields. Perhaps that’s why we’ve seen the Treasury auctioning bonds this week, in anticipation of the CPI report, just in case it ends up being a problem for the massive financing needs of the government.
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