What is the distribution of forecasts for the US CPI? | investingLive

The ranges of estimates are
important in terms of market reaction because when the actual data deviates from the
expectations, it creates a surprise effect. Another
important input in market’s reaction is the distribution of forecasts.

In fact, although we can have a range of
estimates, most forecasts might be clustered on the upper bound of the
range, so even if the data comes out inside the range of estimates but
on the lower bound of the range, it can still create a surprise effect.

CPI Y/Y

• 2.9% (14%)
• 2.8% (59%) – consensus
• 2.7% (22%)
• 2.6% (2%)
• 2.5% (2%)

CPI M/M

• 0.4% (1%)
• 0.3% (29%)
• 0.2% (65%) – consensus
• 0.1% (1%)
• 0.0% (3%)

Core CPI Y/Y

• 3.2% (2%)
• 3.1% (31%)
• 3.0% (61%) – consensus
• 2.9% (6%)

Core CPI M/M

• 0.4% (12%)
• 0.3% (73%) – consensus
• 0.2% (14%)
• 0.1% (2%)

As
always, the focus will be on the Core figures. We can notice that we
have a strong consensus for 0.3% on the Core M/M measure and some cluster around 3.0%-3.1% for the Core Y/Y, although the 3.0% is the consensus. Therefore, the biggest moves will likely be triggered by
deviations from these figures as that would be in the very low consensus.

For some context, yesterday we saw some dollar strength without any fundamental driver, so that could have been hedging activity into a potentially hot CPI. Given that, the easiest trades would be 3.2% or 2.9% for the Core Y/Y figure. In the first case, the US dollar will most likely rally on a more hawkish repricing, while in the second case it would depreciate further as the market might even start to price in a third cut by year-end.

Do note that the Fed is clearly placing more emphasis on the labour market, as it was made obvious by their quick change of heart after just one soft NFP report. That’s why we will likely need at least a 3.2% figure to make the market to price out a cut in September. The focus will then switch to Fed speakers ahead of the Jackson Hole Symposium.