Prices palooza

Daily update

It is a sad comment on the quality of communication by the US central bank that a single US consumer price inflation number can have so much sway over policy expectations. Single data points should not be relied on to this extent. If today’s data does not produce a US rate hike in September, disinflationary forces may keep rates on hold this year. If rates are raised, a second rate hike would probably follow.
Bond markets are clearly concerned by the rapid rise in crude oil prices (US gasoline and diesel prices are also shooting higher). The hope that the political cost of higher fuel prices would encourage the US administration to seek reconciliation with Iran seems to have faded from markets. US Treasury Secretary “House” Bessent’s bond buyback plan has had no discernible impact.
Markets are now pricing in a growth-damaging number of interest rate increases from the ECB, following some hawkish economic forecasts. It is unlikely that the ECB would rush so rapidly down the recessionary path, but they do seem inclined to be seen to be doing something on inflation (without doing anything on inflation).
The random number generator of monthly UK GDP was stronger than expected in July, allegedly reflecting (in part) strength in the manufacturing sector.