US Inflation data for the month of August was published yesterday and it was slightly stronger than expected at 3.7% YoY. Importantly, it is the second month on a row that #cpi increases in the US, which doesn’t necessarily mean there is a change in direction for inflation after 12 months of uninterrupted declines. However, when you look at the table below, it does appear that inflation is tending higher, and the main reason for that is a spike in oil prices. Furthermore, the table below is sorted by CPI, from lowest to highest, and in the upper side of the table, it’s mostly red: countries with the lowest inflation rate are experiencing a spike, and countries with higher inflation rates at the bottom, maybe with other idiosyncratic issues affecting inflation, are still on a downtrend. If we are indeed in a new regime, do expect central banks, and particularly the #federalreserve, to hike more, and consequently, market expectations on rates, currently pointing downward for 2024, should be adjusted upwards. Valuations should follow.
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Table source: Charlie Bilello.
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