Markets Keeping Close Eye on Inflation

Rising rents and higher food costs could have given a slight boost to consumer inflation in July.  The consumer price index, released at 8:30 a.m. is expected by economists to show a 0.1 percent increase, but 0.2 percent for core, or CPI when excluding food and energy.  “This is not a flare. It’s barely a flame,” said Diane Swonk, chief U.S. economist at Mesirow Financial.

Deutsche Bank economists say they expect CPI at 0.2 percent, a year-on-year rate of change of 2 percent. The Deutsche Bank economists also see inflation picking up, and they expect CPI to cross above the 2 percent annualized rate for a sustained period. CPI was at 2 percent in early 2013 and then again in May of this year.

Markets have been on inflation watch, particularly for wage inflation, because a hotter pace may affect Fed policy. The Federal Reserve watches inflation but its preferred metric is the personal consumption expenditures, or PCE, running at about 1.5 percent.

CNBC

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