Raphael Bostic, president of the Atlanta Fed, told the Wall Street Journal yesterday that “I would flip a coin right now” and would choose a 50 basis point increase or a 75 basis point increase.
PCE’s core price index, an inflation measure designed to adjust to changes in consumer habits and the availability of goods, is likely to show a further slowdown in core price pressures when the data is released at 8:30 a.m. GMT, although recent increases in both nonfarm payrolls and average hourly wages are likely to increase personal incomes and expenses.
“Powell cannot make any promises today,” said Pantheon Macroeconomics’ Ian Shepherdson during the Fed Chair’s address in Jackson Hole. “But we expect him to say the interest rate path is now data dependent, which we would interpret as if the August CPI and PPI numbers are reasonable and the wage data is not stronger than in July, the Fed could turn towards an increase of 50 basis points next month.”
Heading into today’s speech, the US dollar index, which tracks the greenback against a basket of six global currencies, was down 0.13% at 108.333, while the yield-sensitive 2-year Treasury yield fell to 3.380.%.
Equity investors should prepare for faster rate hikes, however, as Bank of America’s “Flow Show” report points to the largest weekly outflow of funds from technology stocks in November last year, combined with the largest move in the financial sector since January.
In overseas markets, the European Stoxx 600 was down 0.38% following a weaker reading of consumer confidence in Germany, the region’s largest economy, after an overnight gain of 0.5% for the region-wide MSCI ex-Japan index in Asia.
On Wall Street, futures pegged to the S&P 500 indicate an 11-point drop from the opening bell, while those on the Dow Jones Industrial Average are priced at a 50-point downward move. Futures linked to the tech-focused Nasdaq point to a 50-point dip.
In terms of individual stocks, Dell Technologies
( shares fell lower after the PC and laptop maker delivered stronger-than-expected second-quarter results, but warned that weakening demand from businesses and consumers would reduce sales in the near term. DELL)
( stocks rose sharply after a surprise second-quarter gain that offset the subdued near-term outlook associated with bulging inventories and weaker demand for clothing. GPS)
( shares, meanwhile, fell 3.5% after the chipmaker posted a modestly firmer-than-expected second-quarter profit, but warned that supply chain disruptions would continue to put pressure on sales in the near term. MRVL)