Tuesday’s release of the Producers Price Index (PPI) and Wednesday’s release of the Consumer Price Index (CPI) will be the economic data highlights this week. With inflation remaining stubbornly low despite strong employment conditions and the odds of a December interest rate increase running at around 80%, the importance of the pace of inflation data takes on greater significance.
Expectations are for the PPI and CPI to both increase by 0.1% for the month while the inflation gauges, excluding the volatile food and energy components, are expected to rise by 0.2%. The year-over-year increase for the CPI excluding food and energy would be 1.7%, below the Federal Reserve’s (Fed) target of 2%.
Expect volatility in the fixed income market if the inflation data is either above or below the expected levels as the market has become increasingly sensitive to the level of inflation. Also, keep an eye on Washington this week as the back and forth continues on tax reform.
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