The latest Reuters poll is showing 24 out of 43 economists projecting the first rate hike in the US by June of next year. The futures market is pricing liftoff by September. Citi’s latest analysis puts it in December. And all of these forecasts ar…
The US core PPI surprised to the upside yesterday.
Improved pricing power for US firms? Hardly. Did you ever have the feeling of being ripped off at the gas station when oil prices are falling while prices at the pump barely move? Well, it’s not just a feeling.
GS: – The headline PPI rose 0.2% in October (vs. consensus -0.1%). The surprise was entirely due to core prices, which rose 0.4% (vs. consensus +0.1%), while energy prices declined 3.0%. Within the core, the volatile trade services category—which measures retail and wholesale margins—rose 1.5%, adding three-tenths to the core. Drilling down further, a sizable part of the jump in trade services came from a huge 26% month-on-month increase in fuel retail margins (i.e., gasoline stations). While counterintuitive in light of the decline in energy prices on the month, the increase in this category reflects retail prices declining more slowly than wholesale prices. On balance, we would heavily discount this month’s report in light of the volatility in trade services. The core PPI according to the “old methodology”—finished goods less food and energy—increased a more modest 0.1%.
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The flattening of the monetary base was the result of the Fed “draining” some of the reserves. Most of that was due to the reverse repo program (RRP) as well as the Term Deposit Facility (TDF).