CPI, PPI, and Hormuz: Key Inflation Data and Energy Price Developments to Watch This Week
Crypto markets are bracing for this week's inflation and energy price developments, which could significantly impact U.S. monetary policy. The unexpected drop in nonfarm payrolls by 23,000 in July has reduced the likelihood of a Federal Reserve hike in September to about 44%. Wednesday's Consumer Price Index (CPI) release is expected to show headline inflation ease to 3.4%, while Thursday's Producer Price Index (PPI) will provide insight into wholesale supply chain pressures.
The CPI reading will be crucial in determining the Fed's next move, with a downside surprise potentially strengthening the case for leaving rates unchanged. Conversely, a hotter CPI could increase the probability of another rate hike to above 50%. Citi forecasts a cut as the Fed's next move, potentially in October, while BofA Global Research had expected three quarter-point increases in 2026.
The Strait of Hormuz situation is also being closely watched, with Iran's agreement with Oman on new shipping lanes and potential progress toward restoring normal traffic. This could remove part of the geopolitical premium embedded in crude prices, impacting oil markets and inflation expectations.