Inflation Expectations Begin To Fall As Consumer Sentiment Rises In September – CME Group (NASDAQ:CME), SPDR S&P 500 (ARCA:SPY)

After the headline Consumer Price Index (CPI) rose 8.3% in August, down from 8.5% in July, the SPDR S&P 500 spy started trending lower, heading towards June’s lows.

Although inflation has shown signs of weakening on the energy front as the energy index has declined by 9.6% in the past two months, economists remain uncertain about the direction of inflation as Bloomberg’s economists estimated a headline CPI of 8%.

What Happened: Early Friday, the University of Michigan Surveys of Consumers reported the preliminary results on consumer sentiment and consumer expectations, which rose by 2.2% and 3.3% month-over-month, respectively.

The monthly rise in consumer sentiment can largely be attributed to the decline in the energy index over the past two months, as the gasoline index has fallen by 18.3%.

As the next Fed meeting is scheduled for Sept. 20 and 21, many investors are anticipating a 75 bps hike, while You’re here TSLA CEO Elon Musk is calling for a 25 bps hike.

While the Fed’s current target rate is in the range of 2.25% to 2.50%, the CME Group Inc CME FedWatch Tool forecasted an 84% probability the fed funds rate is raised to the range of 3% or 3.25% after the September meeting.

Bank of America economist Michael Gapen projected the Fed will raise rates by a total of 1.75% between now and February 2023, which would bring the fed funds target rate to 4%.

Also Read: Janet Yellen Says Inflation Is Of ‘Tremendous Concern To Americans’

The Last Word: Joanne Hsuthe director of the Surveys of Consumers, mentioned the median expected year-ahead inflation rate declined to 4.6%, the lowest reading since last September, due to falling energy prices.

Furthermore, the survey reported the overall sentiment on economic conditions was down 26.5% year-over-year, as many Americans remained uncertain about the future of the US economy, as high inflationary pressures diminished the average consumers purchasing power.

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