Ecoinometrics - Is there an inflation print effect?

Where is inflation likely to be for August and does it really matter?

We know that inflation matters as far as this is the number one factor driving the monetary policy at the Federal Reserve. 

A bad inflation print is likely to mean more quantitative tightening for longer. Which in turn should lead to worse economic conditions putting pressure on the valuation of risk assets.

By contrast a good inflation print means the Federal Reserve doesn’t have to do as much tightening. And that’s mid-term bullish.

That’s for the theory. But in practice how are risk assets behaving on the day of the inflation release? Let’s have a look.

---

The Ecoinometrics newsletter helps you navigate the landscape of digital assets and macroeconomics with investment strategies backed by data. Subscribe to get an edge on the future of finance.

Done? Thanks! That’s great! Now let’s dive in.

---

Is there an inflation print effect?

It is this time of the month again. On September 13 we’ll be getting the inflation data for the month of August. 

Inflation was down big time last month. And chances are it will be down again this month. 

Hear me out.

Based on historical month on month changes in the inflation rate the range of values we expect for August can be broken down as follows:

• A surge around 9.4% would be extremely bad.

• A surge above 8.74% would be bad.

• A drop below 8.3% would be a good news.

• A drop around 7.6% would be extremely good.

Check it out.