The US September CPI data is about to be released: Market fluctuation is imminent.

Recently, the US stock market has experienced significant fluctuations due to inflation data. The month-on-month data of the Core Consumer Price Index (CPI) shows that every 0.1% change can have varying degrees of impact on the market. The US CPI data for September, which will be released this Thursday, is likely to trigger market turmoil again.

The Importance of CPI Data

Currently, the Federal Reserve is making every effort to stabilize prices, even at the cost of sacrificing the job market to lower inflation, which highlights the critical importance of every inflation data point.

CPI, as an indicator for measuring actual inflation, is the primary reference for reflecting price increases. Although the Personal Consumption Expenditures Index ( PCE ) is the inflation indicator prioritized by the Federal Reserve, due to its later release time, CPI has effectively become the main basis for assessing price levels.

In the components of the CPI, core CPI is given more importance than overall inflation data. Although the global political sphere is quite concerned about fluctuations in oil prices, the market and the Federal Reserve are more focused on potential inflation trends. Since the Federal Reserve began raising interest rates in March of this year, the month-on-month changes in CPI have attracted more attention than year-on-year changes.

The chart of the euro against the US dollar since 2021 clearly shows the profound impact of inflation on the market.

September CPI Expected Analysis

According to data platform predictions, the core CPI in the United States increased by 0.5% month-on-month in September, lower than the 0.6% in August, but the year-on-year growth rate reached 6.6%, far exceeding the Federal Reserve's target of 2%, and higher than the year-on-year growth rate of 6.3% in August.

The Federal Reserve hopes to see potential inflation data decline to 2% or lower in a clear and sustained manner.

Three Possible Scenarios and Their Impacts

1. Meets Expectations: If the core CPI rises by 0.5% or 0.4% month-on-month, although it meets expectations, it still indicates that inflation is at a high level. The market may take a brief sigh of relief, and dollar bulls may take profits. However, after the initial reaction, investors may reassess the inflation situation, and Federal Reserve officials may reiterate the need for further interest rate hikes. This could become a new opportunity to buy dollars, with a high likelihood of a 75 basis point rate hike again in November.

2. Below Expectations： If the core CPI month-on-month increase is 0.3% or lower, it could trigger a significant rise in the stock market and a sharp decline in the dollar. This would prove that the 0.6% increase in August was a one-time phenomenon, and the bond market might anticipate that the Federal Reserve will raise interest rates by only 50 basis points in November. However, considering the impact of supply chain tightness and rising interest rates on mortgages, the likelihood of this scenario is moderate.

3. Beyond Expectations: If the core CPI month-on-month increase reaches 0.6% or higher again, the market may expect an interest rate hike of around 100 basis points in November. If the increase reaches 0.7%, it could trigger large-scale dollar buying and a stock market crash. Although analysts believe this scenario is less likely, it cannot be completely ruled out due to its highest potential risk.

Summary

Considering the market's muted reaction to last week's non-farm payroll data, and the significant fluctuations triggered by the previous two CPI data releases, this Thursday's September CPI data will undoubtedly become the focus of market attention.