August inflation data holds key implications for the Fed's next move – here's everything you want to know.

August inflation data holds key implications for the Fed's next move – here's everything you want to know.
Federal Reserve Board Chair Jerome Powell speaks during a news conference following a two-day meeting of the Federal Open Market Committee (FOMC) in Washington, U.S., July 27, 2022.Elizabeth Frantz/Reuters

August's Consumer Price Index data will have key implications for the Fed's next move. Today, I'm breaking down what to look out for — and sharing what I learned from some of the sector's best and brightest market-watchers.


The data is out at 8:30 a.m. EDT, so let's get started.

This post first appeared in 10 Before the Opening Bell, a newsletter by Insider that brings you the inside scoop on what traders are talking about — delivered daily to your inbox. Sign up here. Download Insider's app here.

1. There's been lots of chatter that inflation has peaked, and the broad consensus seems to be that today's data will show inflation cooled for the second month in a row.


Markets expect headline CPI to see its first monthly decline since May 2020, dragged down by declining gas prices.

But even if CPI eased in August, New York Stock Exchange senior market strategist Michael Reinking said that doesn't mean the Fed's going to steer away from an outsized rate hike next week.

"They have been guiding markets to rates being close to 4% by year-end," Reinking told me. "And it seems the preference is to take the medicine at this point as opposed to dragging out the process."

But Fed officials have signaled since last week that even if Tuesday's data is better than anticipated, a 75 basis point move remains likely. Janet Yellen said, too, it'll be tough for the Fed to pull off a soft landing.

Analysts this weekend told Insider's Carla Mozée something similar, saying to expect a "knee jerk" reaction in the stock market if CPI is lower than expected, but investors shouldn't expect a pivot from the Fed.


Reinking added that the report will likely dictate which direction stocks move looking ahead.

"If we get a hot number, we could quickly see a retest of last week's low," he said. "However if there's a beat on both headline and core, I would expect a re-test of the mid-August highs."

Brendan Playford, co-founder of data platform Masa Finance, said a hotter-than-expected report could bring more downward pressure, but that's not what he's expecting.

"Stepping back, if you look at commodities and energy, prices have been coming down," Playford told me in an email. "I would be surprised if this was not reflected in the upcoming CPI data."

What do you think today's inflation data will tell us about the next rate hike and the Fed's policy stance? Email or tweet @philrosenn.


In other news:

August inflation data holds key implications for the Fed's next move – here's everything you want to know.
The UK and EU have agreed to ban insurance for Russian oil cargoes, reports said.VCG/Getty Images

2. US stock futures rise early Tuesday, as investors brace for the release of the key CPI data. Meanwhile, uranium prices soared toward their highest level since Russia invaded Ukraine. Here are the latest market moves.

3. On the docket: NortonLifeLock, Wizz Air, and more all reporting.

4. A value investor in the top 1% this year details the strategic changes that catalyzed his market-crushing performance. Even after a brutal 2021, the Frank Value Fund has made a dramatic turnaround this year — and its lead manager said he loves these 8 stocks highlighted by his new approach.


5. S&P 500 companies could see the smallest earnings growth in two years as recession chatter from corporate executives hit the highest level in a decade. Wall Street's top analysts have been slashing earnings estimates for the third quarter. FactSet said 240 companies cited recession in second-quarter calls — compared with the five-year average of 52.

6. The long-awaited Ethereum merge is coming this week. The switch from a proof-of-work to a proof-of-stake blockchain is meant to resolve high traffic and transaction fees through improved energy efficiency. Experts broke down what the merge means and the risks that might remain afterwards.

7. Russian oil exporters are scrambling to buy up special ships that can sail around Europe once fresh sanctions kick in this winter. Bloomberg reported that purchases of secondhand ice-class tankers rose to $1 billion in May to August. Those long-distance vessels are expected to play a pivotal role once the EU imposes its new restrictions on Russian crude.

8. These books will help you understand investing and conquer bear markets. Top Wall Street investors shared which books have taught them the most about money and economics, and where to seek returns. See the list of 20 reads here.

9. Goldman Sachs recommended this batch of fast-growing stocks that are cheaply valued and forging a path to profitability. Stable or falling interest rates and a slow but growing economy could lead to a scenario where growth outperforms value, the bank's analysts wrote in a note to clients. These are the 17 names they're watching right now.


August inflation data holds key implications for the Fed's next move – here's everything you want to know.
Markets Insider

10. Apple stock could soar 38% as consumers opt in for the higher-priced iPhone 14 Pro ahead of Friday's launch. That's according to Wedbush analyst Dan Ives. He said internal checks suggest 80%-90% of coming orders will be for the Pro models — which sell for over $1,000 a pop.

Keep up with the latest markets news throughout your day by checking out The Refresh from Insider, a dynamic audio news brief from the Insider newsroom. Listen here.

Curated by Phil Rosen in New York. (Feedback or tips? Email or tweet @philrosenn).

Edited by Max Adams (@maxradams) in New York and Hallam Bullock (@hallam_bullock) in London.