Sep 13, 2019

Inflation could be making a comeback

Data: St. Louis Federal Reserve; Chart: Axios Visuals

Thursday's U.S. core CPI reading, which measures inflation excluding volatile food and energy items, rose 0.3% in August from July and 2.4% from a year earlier. That was the fastest year-over-year increase since October 2008, according to data from the St. Louis Fed's FRED system.

Why it matters: The costs of the U.S. tariffs on Chinese imports clearly made an impact on the reading, but wages also picked up notably last month as seen in the government's jobs report. The reading may indicate that inflation is making a sustained comeback.

The big picture: While it's not the Fed's preferred measure of inflation (the central bank is partial to the personal consumption expenditures index), the reading breaking above trend will likely motivate the central bank's hawks to dig in their heels in opposing rate cuts this month.

  • It also could make further cuts more difficult, and this could be a problem as the market shows investors already have factored significantly lower U.S. interest rates into asset prices.

Go deeper: Why the Fed wants higher inflation

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The "data-dependent" Fed is fighting the data

Data: CME Group; Chart: Andrew Witherspoon/Axios

If Powell cuts U.S. overnight interest rates today, not only will he be fighting hawkish members of his rate-setting committee, but the supposedly data-dependent Fed will be fighting the data as well.

What's happening: Geopolitical tensions in the Middle East are rising and economic readings from China and the eurozone have continued to deteriorate since the Fed's last meeting — but U.S. data has been strong and even potentially inflationary.

Go deeperArrowSep 18, 2019

U.S. wholesale prices hit 3-year low

Data: Investing.com; Chart: Axios Visuals

September's producer price index reading was significantly weaker than forecast. The index of wholesale goods and services came in well below expectations on both month-over-month and year-over-year metrics.

By the numbers: The overall headline reading fell to its lowest level in 3 years, while the core figure, which strips out volatile food and energy prices, reached its lowest level in 2 years.

Go deeperArrowOct 9, 2019

The great bond selloff signals concerns about inflation

Data: U.S. Treasury; Chart: Axios Visuals

Treasury yields jolted higher last week as investors bailed out of safe-haven U.S. government debt, pushing yields up by the most in one week since June 2013. The selloff that began Sept. 4 sent yields on the benchmark 10-year Treasury note from 1.45% to 1.90% in less than 2 weeks.

Why it matters: While some have credited the spike in Treasury yields to renewed faith in the U.S. economy, the market is likely more worried about a return of inflation — a far greater ill for fixed income investors as it corrodes the value of already issued bonds.

Go deeperArrowSep 16, 2019