Fed Pauses Hopes Ride on August CPI Report: TD Securities

TD Securities economists Oscar Munoz and Eli Nir expect August's Consumer Price Index (CPI) to show contained inflation, which would keep the Federal Reserve (Fed) on hold in September. This is according to their analysis of Governor Waller's preference for pausing rate hikes as long as inflation data allows it.

Munoz and Nir highlight that Governor Waller emphasized the importance of the August CPI report, indicating that he wants to wait until the latest data before making any decisions on interest rates. They expect the CPI this week to prove subdued enough to keep the Fed on hold, but note that the PCE translation will be key in determining the underlying inflation.

The economists forecast that if their prediction materializes, core Personal Consumption Expenditures (PCE) would likely be a modest 0.18% month-over-month (m/m), with market-based rates even more subdued at 0.13%. This would be a welcome number for the more centrist members of the Federal Open Market Committee (FOMC), such as Waller and Williams, who might use it to keep the Fed on hold in September.