We’ll discuss the impact of the September US inflation report on the US Dollar, gold prices, and US stocks starting at 8:15 EDT/12:15 GMT on Thursday, October 13, 2022. You can join live by watching the stream at the top of this note.
Inflation May Not Have Peaked
The upcoming September US inflation report might offer only scant evidence that peak inflation is in the rearview mirror. According to a Bloomberg News survey, headline US inflation figures are due in at +0.2% m/m from +0.1% m/m and +8.1% y/y from +8.3% y/y, while core readings are expected at +0.5% m/m from +0.6% m/m and +6.5% y/y from +6.3% y/y.
Stubborn readings could translate into sustained elevation in Fed rate hike odds, which while good news for the US Dollar, will likely not be the case for US stocks and gold prices.The Federal Reserve has raised rates by 300 basis points this year, with another 75-bps effectively priced for the Novembermeeting. While there is a “long and variable lag” between a rate hike and when it filters through to the economy, there are fresh signs that the economy could be beginning to cool.
Consumer inflation expectations dropped sharply in September, as the Federal Reserve continues to move aggressively to prevent inflation from becoming entrenched. 12-month inflation expectations fell to 5.4%, down from 5.75% in August. Despite this, 3-year inflation expectations did tick higher to 2.9%, up 0.1% from August’s survey. As we continue to remain some ways off of the Fed’s 2% inflation target, signs continue to indicate that inflation may remain elevated for some time.
The NY Fed survey showed that household spending growth for the next 12-months is expected to be +6%, down sharply from August’s forecast of +7.8%. Survey respondents notably said that they only expect home prices to rise by +2%, the lowest print since June 2020. Recent tightening has seen 30-year mortgage rates skyrocket to 7% as the Fed looks to cool a robust housing market. Consumers also see notable increases in gas and food costs, rising by +0.5% and +6.
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