Although MoneyOCD’s description of “near zero” for seasonally adjusted CPI-U is accurate, as is his comparison to July, the markets reacted to headline CPI being UP .1% when it was expected to be down by .1%. Additionally, core CPI was up .5% when it was expected to be up only .3%.
The above means several things:
-
To many, it means that the Fed will have absolutely no excuse for not raising rates 75bp, and should consider a full percent raise.
-
It also means that the “experts” predicting inflation or just as inept as the “experts” who predict non-farm payrolls. They are eternally “surprised” by “unexpected” data.
-
It also means that the U.S. dollar is going to strengthen even more than it has because of the big rate hike. This will not be great news for companies that have significant exports, nor for domestic companies who have broad competition from imports. Additionally, the strong dollar will seem to make gold cheaper.