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Goldman Sachs: CPI in line but misses recent inflation pressures, Fed keeps rate hike option
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On September 11, Goldman Sachs economist Alexandra Wilson-Elizondo commented on the latest CPI release, stating it was largely in line with expectations. While this initially appears positive for investors, she argued it has heightened suspense around the upcoming Federal Reserve interest rate decision. The economist noted that the data does not fully capture recent inflationary pressures, particularly the latest surge in energy prices and the spread of commodity price gains from energy to metals and agriculture. She found little evidence that inflation is returning to target in the short term and stated that today's data does not rule out stronger price pressures ahead. Wilson-Elizondo concluded that the in-line data allows the Federal Reserve to keep the option of raising rates open without being forced to act immediately. She suggested that market focus should now shift to other factors, including communications from Warsh, energy prices, and labor market data, rather than the CPI release itself.
Source report
September 11 — Goldman Sachs economist Alexandra Wilson-Elizondo commented on today's Consumer Price Index (CPI) release, stating that the data was "largely in line with expectations."
Key Takeaways
- Surface-level alignment: On the surface, the CPI figures are what investors wanted to see, but they have "significantly heightened uncertainty around next week's interest rate decision."
- Incomplete picture: The data do not fully capture recent inflationary pressures, and there is "little evidence that inflation is returning to target in the short term."
- Timing gap: The survey period for this report predates:
- The latest surge in energy prices
- The spread of commodity price gains from energy into metals and agriculture
Outlook
Wilson-Elizondo noted that today's inflation data "do not rule out the possibility of stronger price pressures ahead." She summarized:
"Today's in-line data will allow the Federal Reserve to keep the option of raising rates open without being forced to act, so markets may now focus more on Warsh's communications, energy prices, labor market data, and what happens next, rather than on today's release."
Source
thsWestern