The producer price inflation report released on Tuesday stirred worries concerning a hot consumer price inflation print, which weighed down on the market in early trading. An economist, however, pointed to a data point that could allay concerns about pricing pressure.
What Happened: The results of the National Federation of Independent Business's small business survey released Tuesday threw up some encouraging news for Wednesday's CPI print, said David Rosenberg, founder and president at Rosenberg Research & Associates, in a post on X.
Sharing two charts on current and future pricing power, the economist said the "downtrend in both is notable." He also said the latest installment of the Fed's Beige Book, a compilation of anecdotal evidence of economic conditions in the 12 Federal Reserve districts nailed this.
Ahead of tomorrow's CPI report, some encouraging news from today's NFIB small biz survey on current pricing and future pricing power. The downtrend in both is notable. The Fed Beige Book nailed this. pic.twitter.com/XwqwWvGskM
— David Rosenberg (@EconguyRosie) May 14, 2024
Why It's Important: With the Federal Reserve's fixation on bringing inflation below its 2% upper ceiling, incoming data is keenly watched by the Street. Traders are particularly worried about inflation potentially resuming its upward climb and preventing the Fed from reversing its rate hikes.
The next Federal Open Market Committee meeting is scheduled for June 11-12. Between now and then, traders get to digest two CPI inflation reports, one coming just ahead of the Fed decision on June 12. A personal income and spending report, which comprises the Fed's preferred inflation gauge, namely the annual rate of core price consumption expenditure data, is also due before the next meeting.
This apart, traders may also look for cues on rate trajectory from the May non-farm payrolls report due in early June.
Fed Chair Jerome Powell on Tuesday stuck with his rhetoric that inflation has stayed elevated, likely keeping rates on hold for longer. But the market construed it as suggesting a rate cut could come as early as September.
The CPI report for April due Wednesday at 8:30 a.m. EDT is expected to show a 0.4% month-over-month increase in the headline number, compared with March's 0.3% rise. On an annual basis, however, the consumer price index may have risen 3.4%, lower than the 3.5% gain in the previous month.
The monthly and annual rates of core consumer prices are expected at 0.3% and 3.6%, respectively, versus March's 0.4% and 3.8%.
The iShares TIPS Bond ETF (NYSE:TIP), an ETF tracking the investment results of an index composed of inflation-protected U.S. Treasury bonds, ended Wednesday's session up 0.19% at $106.29, according to Benzinga Pro data.
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