JPMorgan August CPI Preview

US market focus is really centred on whether core CPI rounds to 0.2% or 0.3%. Feroli’s framework is that a 0.2% print would be soft enough to support a hold in September, while 0.3% would be firm enough to keep a hike in play. Markets are already pricing roughly a 63% chance of a 25bp move at the September 16 meeting, so this report should go a long way toward clarifying that decision.

For equities, the bigger tail risk is a materially hotter print that pushes up expectations for additional tightening in October or December. If the data instead supports either a hold or a hawkish hold, the equity reaction could be positive, particularly with positioning still relatively neutral and hedge funds beginning to add gross exposure again. In that scenario, momentum, technology and cyclicals would likely lead any upside.

The broader message is that markets may stay choppy into the release, but the underlying risk-reward is still seen as skewed somewhat higher unless inflation meaningfully surprises to the upside. Fundamentals remain supportive, while current positioning leaves room for investors to re-lever if the CPI print does not force a more aggressive Fed path.