September 2022 CPI thoughts - 7investing 7investing
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September 2022 CPI thoughts

I know I’m not alone in already thinking ahead to next week’s (September 13) release of the August Consumer Price Index report.

What could it bring? Well, from an equity investors’ standpoint, I should hope it brings more signs that inflation has indeed already peaked. Though last month’s (July, released in August) report pegged annual inflation at 8.5%, it was encouraging in that the figure was lower-than-expected — decelerating from a four-decade high of 9.1% in June thanks in part to declines in the prices of energy and gasoline (the latter of which has only continued to fall in recent weeks). Core CPI (which excludes energy and food costs) also arrived at 0.3%, decelerating from June’s 0.7% year-over-year increase. Housing might also be showing some signs of easing, with companies like Redfin (NASDAQ: RDFN) reporting higher mortgage rates contributing to worsening affordability, homebuyer and seller hesitancy and, consequently, lower selling prices.

That doesn’t mean, however, that the U.S. Federal Reserve will be willing to take a more dovish stance toward monetary policy; until Fed officials are absolutely confident inflation is firmly under control — which might well be several more months yet — they’ll almost certainly continue increasing rates…with a 50 to 75 basis point hike most likely at their next meeting.

But our stock market is a forward-looking machine. So you can be sure we’ll be keeping a close eye on the CPI print next week for any sign that inflation might be easing more rapidly than anticipated. If that happens, it could provide exactly the fuel the market needs to snap out of its current pessimistic state of risk-off stupor.