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Inflationary trends in the spotlight: U.S. awaits crucial CPI data this week

The financial markets are forecasted to endure continued unprecedented volatility.

Quick Take

Thursday's upcoming US CPI data is expected to confirm inflationary pressures persisting well beyond the 2% target, indicating an economy where prices are rising faster than anticipated. Analysts estimate core inflation — which excludes the more volatile components of food and energy — at 4.8%. Interestingly, the year-over-year inflation rate is projected to rise to 3.3%, a noticeable increase from June's 3%.

Meanwhile, commodities like oil have begun to surge, now exceeding $80 per barrel, potentially stoking further inflationary momentum. A historical examination suggests a parallel with the inflationary waves of the 1970s. Should this pattern repeat, inflation could potentially spike to around 10% in subsequent waves. However, unlike the 1970s stagflation scenario, today's economy boasts a significantly lower unemployment rate, registering a 40-year low of 3.5%, indicating robust employment despite rising prices.

US inflation: (Source: FRED)
US inflation: (Source: FRED)