đşđ¸ RATE COMES OUT IN AUGUST â AND THE HEADLINE MISLEADS
The numbers:
Full month: 0.4% â in line
Full 12 months: 3.4% â in line
Core month: 0.3% â one tenth above expectations
Core in 12 months: 2.4% â in line, and the lowest level since March 2021
Three of the four readings came exactly as the market expected. Only the monthly core figure slipped, by one tenth.
Why did the market rise?
Because the data wasnât the disaster that âabove expectationsâ suggests.
Core is what the Fed truly looks at, because it strips out food and energyâthe two things I swear I donât control. And the core in 12 months fell to 2.4%, the lowest level in more than four years.
Thereâs also a bit of arithmetic detail that almost nobody will mention: if monthly core were truly 0.34%, the 12-month cumulative figure would probably have come in at 2.5%. Since it came in at 2.4%, the actual number should be very close to 0.25%âi.e., barely crossed the rounding line.
One tenth in the headline that, in practice, amounts to two hundredths.
And context matters:
The market got to this report pricing in a 72% chance of the Fed raising rates on Wednesday. Cut, zero. Nobody was positioned for something good.
When everyone has already sold out of fear, you donât need good news to push prices up. All you need is for the news not to confirm the nightmare.
A lesson that holds forever: what moves price isnât the headlineâitâs the gap between the data and what was already priced in.
â ď¸ What remains open: this report didnât solve anything for the Fed. It gives them ammunition on both sidesâeither they can cite the 0.3% for the month to raise rates, or the 2.4% annual figure to hold steady.
đ The real event is Wednesday at 3:00 PM BrasĂlia time. And itâs not the decision itself, which is already priced in. Itâs the dot plot, which shows whether any tightening would be isolatedâor the start of a cycle.
The numbers:
Full month: 0.4% â in line
Full 12 months: 3.4% â in line
Core month: 0.3% â one tenth above expectations
Core in 12 months: 2.4% â in line, and the lowest level since March 2021
Three of the four readings came exactly as the market expected. Only the monthly core figure slipped, by one tenth.
Why did the market rise?
Because the data wasnât the disaster that âabove expectationsâ suggests.
Core is what the Fed truly looks at, because it strips out food and energyâthe two things I swear I donât control. And the core in 12 months fell to 2.4%, the lowest level in more than four years.
Thereâs also a bit of arithmetic detail that almost nobody will mention: if monthly core were truly 0.34%, the 12-month cumulative figure would probably have come in at 2.5%. Since it came in at 2.4%, the actual number should be very close to 0.25%âi.e., barely crossed the rounding line.
One tenth in the headline that, in practice, amounts to two hundredths.
And context matters:
The market got to this report pricing in a 72% chance of the Fed raising rates on Wednesday. Cut, zero. Nobody was positioned for something good.
When everyone has already sold out of fear, you donât need good news to push prices up. All you need is for the news not to confirm the nightmare.
A lesson that holds forever: what moves price isnât the headlineâitâs the gap between the data and what was already priced in.
â ď¸ What remains open: this report didnât solve anything for the Fed. It gives them ammunition on both sidesâeither they can cite the 0.3% for the month to raise rates, or the 2.4% annual figure to hold steady.
đ The real event is Wednesday at 3:00 PM BrasĂlia time. And itâs not the decision itself, which is already priced in. Itâs the dot plot, which shows whether any tightening would be isolatedâor the start of a cycle.
