Markets prepare for consumer inflation in upcoming week

Under the current market conditions the investors are closely observing the trend of inflation. The consumer price index is something that is going to be a big watch in the coming week. The latest investors trend has been noticed just a week before the September meeting of the Federal Reserve of expected to be held in the coming week. The meeting will have discussions about plans to bring down the bond buying programs.

As per the market professionals, the increased inflation figures would force Fed to slow down the bond purchases that account for $120 billion per month. Slowing down the process of the asset purchase would be the first big step of the Fed while stepping away from easing the policy that was put in place to deal with the coronavirus pandemic. The consumer price index is expected to be out on September 14, 2021 while the retail sales data will be released on September 15, 2021.

As per the consensus estimate, there could be an increase in the consumer prices to go up at 5.3 percent annually in the month of August. It was noticed that the consumers continue to come down from their high spending trends seen earlier this year. There is also a threat of a combination of higher inflation and slower spending trends, especially after the weaker job reports in the month of August. Such a situation could lead to stagflation.

During the beginning of the year, the retail sales grew due to stimulus payments and as vaccines started to rollout. A lot of liquidity was noticed and the consumers went ahead to spend more than they could. The slow trend is not just noticed in the consumer spending but is also seen on the business spending and housing. There are a few signs of stagflation but the actual stagflation could be seen in rising unemployment and rising inflation. For now the demand is not the problem but the supply could be an issue.

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