All eyes on US CPI today

Khatija Haque - Head of Research & Chief Economist
Edward Bell - Senior Director, Market Economics
Daniel Richards - MENA Economist
Published Date: 14 September 2021


  • The focus today will be on the US CPI data for August, with analysts expecting a 0.4% m/m (5.3% y/y) rise, slightly slower than July’s 0.5% m/m (5.4% y/y) reading. The market is expecting some moderation in the re-opening segments (airfares, accommodation away from home, used car prices) that has been largely responsible for the surge in inflation over the last few months. Core CPI is also expected to ease slightly to 4.2% y/y from 4.3% previously.  Should inflation come in much higher than forecast and broaden out beyond the covid-sensitive categories, it could complicate the Fed’s decision making following a much weaker than expected payrolls gain last month.
  • House Democrats released their proposed tax increases yesterday, which were lower than the proposals from the White House.  Under the proposal, households earning more than USD 523k will see their marginal tax rate rise to 39.6% from 37% currently, and the corporate tax rate would rise to 26.5% from 21% currently, but this would only apply to firms with annual revenue of more than USD 5mn.  The minimum tax on overseas earnings would increase to 16.5% from 10.5% currently, well below Biden’s proposed 21% rate.  Higher capital gains tax would only affect those earning more than USD 400k pa.  The House Ways and Means Committee could vote on this legislation next week, after which it would need to be approved by the full House and the Senate as part of the budget reconciliation process.
  • CPI in India slowed to 5.3% y/y in August from 5.6% in July and below analysts’ forecasts. Food inflation slowed to 3.8% y/y from 4.5% in July. While the headline rate is within the RBI’s target range, it s expected to accelerate in the coming months.
  • Lebanon is to receive USD 1.1bn in special drawing rights from the IMF, the country’s finance ministry said on Monday. The country has been enduring a financial and economic crisis since defaulting on its international debt in March 2020, but the formation of a government this week raises hopes for some improvement. President Michel Aoun said yesterday that he hoped that the new government’s formation would herald a resumption of talks with the IMF with regards a comprehensive recovery programme.
  • The UAE is looking to grow economic ties with Israel to more than USD 1tn over the next 10 years according to Economy Minister Abdulla Bin Touq. Bilateral trade currently accounts for USD 600-700mn between the countries, in addition to investments. 

Today’s key economic data and events

  • 08:30 JN Industrial production (Jul)
  • 10:00 UK ILO unemployment rate forecast 4.6%
  • 16:30 US CPI (Aug) forecast 0.4% m/m and 5.3% y/y

Fixed Income

  • US Treasury yields drifted lower as the market waits for the August CPI print later today. Yields on the 2yr UST closed essentially flat on the day at 0.2129% while the 10yr gave up a bit more than 1bps to settle at 1.3259%. Annual CPI is expected to come in at 5.3% for August, a modest slowdown from August and the market looks prepared for the transitory view of inflation to remain. Any upside surprise could spark an immediate jump in yields.
  • Emerging market bonds closed relatively steady. Yields on Indian 10yr government bonds edged up 1bps to 6.193% while South African 10yr yields added 4bps to 9.229%. Local currency 10yr Turkish bond yields were flat at 16.54% while the country priced USD 2.25bn in a USD issue. A 7yr USD 750m tranche priced at a yield of 5.7% while a USD 12yr USD 1.5bn tranche priced with a yield of 6.5%.


  • Currency markets opened the week on a relatively quiet footing with the DXY index edging up by 0.1% to 92.675. Across majors, movements were relatively limited with EURUSD holding essentially flat with a moderate downward bias, similar to moves in GBPUSD and USDJPY.
  • AUD and CAD were the notable movers on the day with USDCAD falling 0.35% to 1.2648 in favour of the loonie while AUD added 0.18% to 0.7369.


  • Following losses last week, equity markets started the week in robust fashion, with gains across most major developed market indices. In the US, both the S&P 500 (0.2%) and the Dow Jones (0.8%) closed higher, although the NASDAQ remained under pressure and closed down -0.1%. In Europe, The DAX and the FTSE 100 both added 0.6%, while the CAC trailed with a 0.2% gain.
  • In Asia, the modest gains seen yesterday are being largely held so far this morning, but movement is limited again. The Shanghai Composite added 0.3% yesterday, and the Nikkei 0.2%.
  • Within the region, things were more mixed. Both the DFM (-0.3%) and the ADX (-0.7%) lost ground on Monday, while the Tadawul gained 0.4%. The EGX 30 added 0.9%.


  • Oil prices started the week on a stronger footing with Brent futures up 0.8% at USD 73.51/b and WTI adding more than 1% to USD 70.45/b. OPEC nudged its demand forecast for the final quarter of 2021 downward slightly as it assesses the impact of the Delta variant on global growth. Nevertheless, the bloc is still expecting a strong recovery in demand next year to 4.15m b/d from 3.3m b/d previously.

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