Daybreak Weekend: US CPI, ECB Decision, BRICS Summit

SPEAKER_1 (0:02)

Bloomberg Audio Studios, Podcasts, Radio, News.

Nathan Hager (0:09)

This is Bloomberg Daybreak Weekend, our global look at the top stories in the coming week from our Daybreak anchors all around the world. Straight ahead on the program, we look to some key inflation data in the US. I'm Nathan Hager in Washington.

Stephen Carroll (0:22)

I'm Stephen Carroll in London, where we're looking ahead to what renewed fears about inflation mean for the ECB's path ahead.

Doug Krizner (0:29)

I'm Doug Krizner, looking at the balancing act ahead for Prime Minister Modi, as India prepares to host the BRIC Summit.

SPEAKER_1 (0:38)

That's all straight ahead on Bloomberg Daybreak Weekend, on Bloomberg 1130 New York, Bloomberg 99.1 Washington DC, Bloomberg 92.9 Boston, DAB Digital Radio London, Sirius XM 121, and around the world on bloombergradio.com and the Bloomberg Business App.

Nathan Hager (1:02)

Good day to you, I'm Nathan Hager. And we begin today's program with some key inflation data coming out in the US. We get the August producer price index on Thursday, consumer prices the following day, Friday. Of course, all this comes days before the Federal Reserve's September policy decision. And here to get us ready for it in our Washington DC studio is Bloomberg News Fed and economy reporter, Enda Curran. So, Enda, we've already heard Fed Governor Chris Waller say this inflation data is going to heavily influence his decision on interest rates. Is that the case across the committee? Do you think?

Enda Curran (1:37)

I think it is. It feels like a lot is riding on the inflation data that we're going to get this week. As you mentioned, we will get consumer and producer prices. So officials will calculate from the CPI and the PPI their own preferred gauge of inflation, which is called PCE.

And from that, then, they will have a good sense as to where inflation is at and what the numbers are telling them. Now, it's not a done deal going to inflation data that a rate hike in September is guaranteed.

We get different signals from officials. We have some who are warning that inflation remains consistently too high above the Central Bank's 2% target. They look at pockets of inflation in the services sector, for example. That's what a lot of people are worried about. Less worried about tariffs. And believe it or not, less worried about oil prices unless it starts to spill over into the broader economy. It kind of serves the sector that people are more worried about. On the other hand, you have some officials making the point, listen, inflation has been coming off the ball. We don't need to raise rates, we have time to wait and see. And that's why those numbers will determine what happens when they meet in the mid-September.

Nathan Hager (2:40)

Okay, so let's get into the specifics of what we're thinking we could see in the numbers coming out this week. The consensus on the Bloomberg terminal on producer prices for final demand in August is for a pretty significant increase. This has been pretty well above any 2% target. I don't know if that's a 2% target that the Fed sees on producer prices, but what do we see driving that on the producer level?

Enda Curran (3:01)

Well, there isn't always a perfect correlation between producer prices and consumer prices. I mean, logically, you would think upstream what producers are paying will be eventually paid off downstream to consumers. It doesn't always work like that. Nonetheless, though, lately, there is a bit of more of a spillover or correlation than usual, Nathan. Part of the issue there is that the producers are in the front line of costs related to energy. So, oil costs, we're seeing that big spike in diesel costs, for example. Those costs are inevitably going to be passed on downstream to their own consumers.

Of course, we're also on the front line of some of the AI-related capex build-out booms. Some of that is impacting PPI. So, those pressures, those upstream pressures are certainly in the system and the worry is that they're going to filter downstream too.

Nathan Hager (3:44)

And to that point, when it comes to the consumer price index as well, at least on the headline level, still well above the 2% target, north of 3% at the same time, we're looking at the core expected to edge ever so slightly closer to the 2% target. What are we expecting when it comes to consumer prices this time around?

Enda Curran (4:05)

Again, keep an eye out for any hint of broader spillover from higher oil prices and energy costs.

Is it really impacting the costs for other goods through say like airline tickets, for example, you might see an uptick in restaurant and food costs because of delivery prices, for example, there will be a lot to compute from all of that. Also keep an eye on costs of household items that are being impacted by the AI boom, like laptops and technology. It's only a small part of consumer inflation basket, but keep an eye on that. But then look at the broader services basket, the cost of insurance, for example, home insurance and car insurance. That's been a big issue on the inflation front. Keep an eye on what's happening on shelter and mental costs. So these are some of the usual suspects people look at every month in terms of to get a gauge where is inflation headed. And I think at the moment, as I say to you, there isn't a great degree of confidence that inflation is slowing the way policymakers would like. And I think all told, it will probably require a big downside reading on the inflation numbers to really give policymakers comfort.