Following the release of the non-farm payrolls data, the market's pricing in a September rate hike rose from approximately 50% to 60%, indicating that strong employment and some inflationary risks have already been priced in. However, a rate hike is not yet a certainty, and the remaining disagreements will primarily be resolved by next week's CPI. But what needs attention going forward is not only whether this CPI is overheated, but also when international food prices will transmit to US end-market inflation.
The FAO food price index rose 1.9% month-over-month in August, with sugar and cereal prices rising 11.9% and 2.2%, respectively. However, Ole S. Hansen, head of commodities at Saxo Bank, believes that this round of price increases will not be fully reflected in the upcoming US August CPI: the FAO tracks international bulk food prices, and their transmission to processing, transportation, and retail typically takes 3 to 6 months; furthermore, food prices mainly affect the overall CPI and are not included in the core CPI. This means that even if this CPI is moderate, food inflation may still gradually rise from the fourth quarter to 2027, weakening market confidence that inflation can sustain a natural decline.
