After August inflation came in too hot, investors aren’t expecting a Powell pause anytime soon

Wednesday, September 14, 2022 by Robinhood Snacks |
We already “be inflation” (Patrick T. Fallon/Getty Images)

We already “be inflation” (Patrick T. Fallon/Getty Images)

Seeing red… Stocks had a no good, very bad day after August inflation numbers came in hotter than expected. Lower gas prices helped slow the pace of inflation for a second straight month, but the TL;DR is that it’s still ridiculously high, with consumer prices up 8.3% from last year.

  • Why does $5/gallon sound cheap? Energy prices fell 5%, with gas down 10.6%. But while pump and airfare prices were lower, utility and electric bills ticked up.
  • Why is this croissant $9? Food prices were up nearly 0.8% month over month, with cereal and bakery products up 1.2%.
  • Why is rent my entire paycheck? “Shelter” prices rose 0.7% over the month as housing gets even pricier. FYI: The median monthly rent in America’s 50 largest cities hit a record $1.9K in July as prices increased for 16 months straight.

No rest for JPow… Before this bummer report dropped, investors were gaining confidence that inflation could be slowing for real (which could compel the Fed to cool its ’flation-fighting crusade). Now there’s a lower chance of a Powell pause (aka: a Pow-se).

  • It’s likely the Fed’ll raise rates by 75 basis points at its meeting next week, instead of the 50 basis points some were hoping for.
  • To tamp inflation to a benchmark target of 2%, the Fed’s already had four hikes this year — including two jumbo hikes of 75 basis points in June and July.
  • Tech stocks have been hit hard, as high rates lower the potential future earnings of companies whose valuations are largely tied to growth… potential.

Inflation’s a Grinch… The holidays are months away, but more than half of Americans are already stressed about buying gifts this season. While ’flation erodes spending power, rate hikes make borrowing pricier (think: credit-card debt). That could put a dent in major retailers’ biggest splurge season of the year.