The week after payrolls is often quiet, but as DB's Jim Reid notes, with the 25bps vs 50bps Fed debate for next week raging, there will be plenty of opportunity for volatility as the market flits between the two. With the Fed now in its media blackout period ahead of next Wednesday's almost certain first cut in the cycle, it seems that 25bps is just the more likely based on what the Fed have been telling us. However, given past form if they do decide 50bps is firmly on the table it is probably likely that well-informed press contacts will give us a steer. However, if that materializes it may be nearer to this time next week rather than the next few days. So 25 vs 50 will be the main market focus this week.

Wednesday's US CPI and Thursday's PPI will probably help move that debate on, but it seems employment is more important at the moment and Friday's mixed employment report had arguments for both sides, so the swing factor is probably how the committee view labor markets rather than inflation. Before we preview the inflation data and review Friday's employment report, the other two main global highlights are the US presidential election debate between Harris and Trump tomorrow night (we highlighted several pre-debate trades here), and the ECB decision on Thursday, likely to be a 25bps cut. The election seems to have fallen down the pecking order of market topics since Harris replaced Biden as the Democratic candidate. However Trump has edged back in the lead on the betting odds now, and RealClearPolitics' average of various odds puts Trump at 51.5% as of this morning. This, the debate, and the fact that it’s now only 2 months to polling day means that this will soon become the most important topic again in markets alongside the Fed and any US recession fears.

In terms of more minor data and events this week, today sees the 1-yr NY Fed inflation expectations series and July US consumer credit. Tomorrow sees the NFIB small business optimism survey, the latest UK employment data, China trade, Italian IP and a 3yr UST auction. Outside of the aforementioned US CPI, Wednesday sees UK monthly GDP and a 10yr UST auction. Thursday will obviously see US jobless claims in addition to a 30yr UST auction. Friday sees the US University of Michigan consumer survey. See the rest of the week ahead in the day-by-day calendar at the end.

In terms of Wednesday's US CPI, Deutsche Bank is expecting headline (+0.20% forecast vs. +0.15% previously) and core (+0.23% vs. +0.17%) CPI to be around the same level. This is in line with consensus. This would equate to YoY headline CPI dropping 30bps to 2.6%, with core unchanged at 3.2%. As DB economists point out, the three-month annualised rate would remain below 2% (1.9% vs. 1.6% in July) and with the six-month annualized rate falling by 20bps to 2.6%. A surprise increase in rents in July will mean this category again sees a lot of focus for August. Our economists think we'll return closer to June's tamer levels. Indeed they anticipate primary and owners’ equivalent rents to rise by 0.32% (vs +0.49% in July) and 0.30% (vs. +0.36% in July), respectively.

As for PPI on Thursday, headline (+0.2% vs. +0.1%) and core (+0.2% vs. unch.) should post similar gains to their CPI counterparts. As always, we will pay closest attention to the categories that feed into the core PCE deflator – namely, health care services, airfares and portfolio management. Challenging base effects should cause the year-over-year growth rate of core PCE to tick up to 2.7%.

Here is a day-by-day calendar of events, courtesy of Deutsche Bank

Monday September 9

Data: US July consumer credit, wholesale trade sales, August NY Fed 1-yr inflation expectations, China August CPI, PPI, Japan August Economy Watchers survey, bank lending, July BoP current account balance, trade balance

Earnings: Oracle

Tuesday September 10

Data: US August NFIB small business optimism, China August trade balance, UK July average weekly earnings, unemployment rate, August jobless claims change, Japan August M2, M3, machine tool orders, Italy July industrial production, Denmark and Norway August CPI, Sweden July GDP indicator

Auctions: US 3-yr Notes ($58bn)

Other: Second presidential debate (9pm ET)

Wednesday September 11

Data: US August CPI, UK July monthly GDP

Central banks: BoJ's Nakagawa speaks

Earnings : Inditex

Auctions: US 10-yr Notes (reopening, $39bn)

Thursday September 12

Data: US August PPI, monthly budget statement, initial jobless claims, UK August RICS house price balance, Japan August PPI, Germany August wholesale price index, July current account balance, Italy Q2 unemployment rate, Canada July building permits, Sweden August CPI

Central banks: ECB decision, BoJ's Tamura speaks

Earnings: Adobe

Auctions: US 30-yr Bonds (reopening, $22bn)

Friday September 13

Data: US September University of Michigan survey, August import price index, export price index, Japan July capacity utilisation, Canada Q2 capacity utilisation rate

Central banks: BoE inflation attitudes survey, ECB's Rehn speaks

* * *

Finally, looking at just the US, here is Goldman noting that the key economic data releases this week are the CPI report on Wednesday and the University of Michigan report on Friday. Fed officials are not expected to comment on monetary policy this week, reflecting the blackout period in advance of the FOMC meeting on September 17-18.

Monday, September 9

10:00 AM Wholesale inventories, July final (consensus +0.3%, last +0.3%)

Tuesday, September 10

06:00 AM NFIB small business optimism, August (consensus 93.7, last 93.7)

10:00 AM Fed Vice Chair for Supervision Barr speaks: Fed Vice Chair for Supervision Michael Barr will speak at a Brookings event on the Basel III Endgame. Speech text and Q&A are expected.

Wednesday, September 11

8:30 AM CPI (MoM), August (GS +0.18%, consensus +0.2%, last +0.2%); Core CPI (MoM), August (GS +0.23%, consensus +0.2%, last +0.2%); CPI (YoY), August (GS +2.56%, consensus +2.6%, last +2.9%); Core CPI (YoY), August (GS +3.17%, consensus +3.2%, last +3.2%): We estimate a 0.23% increase in August core CPI (month-over-month SA), which would leave the year-over-year rate unchanged at 3.2%. Our forecast reflects further declines in used (-0.5%) and new (-0.1%) car prices, based on mixed auction prices and a sequential increase in new vehicle incentives. We expect a rebound in airfares (+1.5%), as well as another firm increase in the car insurance category (+0.7%) based on continued—albeit decelerating—increases in premiums in our online dataset. After last month’s outsized increase, we expect moderation in the shelter components (OER +0.33%, primary rent +0.29%). We estimate a 0.18% rise in headline CPI, reflecting higher food prices (+0.3%) but lower energy prices (-0.7%).

Thursday, September 12

08:30 AM PPI final demand, August (GS flat, consensus +0.1%, last +0.1%); PPI ex-food and energy, August (GS +0.2%, consensus +0.2%, last flat); PPI ex-food, energy, and trade, August (GS +0.2%, consensus +0.2%, last +0.3%);

08:30 AM Initial jobless claims, week ended September 6 (GS 225k, consensus 230k, last 227k); Continuing jobless claims, week ended August 31 (consensus 1,850k, last 1,838k)

Friday, September 13

08:30 AM Import price index, August (consensus -0.2%, last +0.1%); Export price index, August (consensus -0.1%, last +0.7%)

10:00 AM University of Michigan consumer sentiment, September preliminary (GS 68.6, consensus 68.3, last 67.9); University of Michigan 5-10-year inflation expectations, September preliminary (GS 3.0%, last 3.0%)

Source: Goldman, DB

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