Latest / Markets with Megan: A Quick Financial Markets Update / PPI Report Builds Case For Rate Hike | S3 E166 | 09-10-26

Transcript

PPI Report Builds Case For Rate Hike | S3 E166 | 09-10-26 · Markets with Megan: A Quick Financial Markets Update

• 0:02
  Megan Horneman: We're getting some of the inflation data that the Fed's going to see before they meet next week.
• 0:07
  Megan Horneman: It's Thursday, September the 10th, and this is Markets with Megan.
• 0:10
  Megan Horneman: If you like this podcast, you can subscribe to it, hit the alarm bell, share it with your friends, family, colleagues, anybody who's interested when they see that economic data that gets released, what the news headlines mean and what it means for the markets.
• 0:24
  Megan Horneman: So let's dig into what we received this morning.
• 0:26
  Megan Horneman: This morning we received the producer price index, and this came in as expected, basically across whether you look at final demand, X Food and Energy, or X Food Energy and Trade.
• 0:38
  Megan Horneman: But I've said it before a million times, as expected is not good enough.
• 0:42
  Megan Horneman: When you look at these data on a year-over-year basis, the final year-over-year number, which includes everything in there, that's on it's rising 5.4%.
• 0:54
  Megan Horneman: That's up from 4.8% in the in the month of July.
• 0:59
  Megan Horneman: When you exclude the volatile items like food, energy, and trade, it's rising 4.7% on a year-over-year basis.
• 1:08
  Megan Horneman: So this is running very hot, not comfortable enough for the Federal Reserve.
• 1:12
  Megan Horneman: Let's take a look at some of the details in here.
• 1:14
  Megan Horneman: Um, food is an issue.
• 1:16
  Megan Horneman: That was up one 1.8%, crude food.
• 1:19
  Megan Horneman: Um, food for exporting was up a percent.
• 1:22
  Megan Horneman: So we are seeing some pressure there.
• 1:24
  Megan Horneman: Most of this was in the energy sector sector, but as I mentioned, even if you exclude food, energy, and trade, it was up three tenths.
• 1:33
  Megan Horneman: Now, when we dig into the pieces of information in this report that will go into the PCE index, which is the Fed's preferred inflation gauge, you can see airline prices were up 0.7% in the month of August after a decline in July.
• 1:51
  Megan Horneman: Airline prices are up almost 20% on a year-over-year basis.
• 1:56
  Megan Horneman: When you look at legal services, they rose 1.7%.
• 2:00
  Megan Horneman: They're rising about 8% on a year-over-year basis.
• 2:04
  Megan Horneman: Hospital inpatient care up 5 tenths, so that's rising 4.3% on a year-over-year basis.
• 2:10
  Megan Horneman: Um, outpatient care rose four tenths, and that's after rising six tenths last month.
• 2:16
  Megan Horneman: So inflation is not going away.
• 2:19
  Megan Horneman: This is an issue the Fed's going to have to address.
• 2:22
  Megan Horneman: We have said that we think September is a likely chance and that the Fed should raise interest rates in September.
• 2:28
  Megan Horneman: Right now, because of this data today, there is a 72% chance that they will raise interest rates at their meeting next week.
• 2:36
  Megan Horneman: Tomorrow we will get the consumer price index.
• 2:39
  Megan Horneman: We'll see what that we'll come back and report on that report on that report.
• 2:44
  Megan Horneman: We'll see if that's has any surprises for investors, but the markets don't like this data today.
• 2:49
  Megan Horneman: We wrote in our weekly insights this week about the rise in sovereign bond yields.
• 2:54
  Megan Horneman: We're seeing that um accelerate today.
• 2:57
  Megan Horneman: We're above a 4.9% on the 10-year treasury.
• 3:01
  Megan Horneman: It really wants to get to that 5%.
• 3:03
  Megan Horneman: We do think it's likely.
• 3:04
  Megan Horneman: Um, this is all because of the inflation problem.
• 3:08
  Megan Horneman: There is uh less buying of treasuries.
• 3:10
  Megan Horneman: I think, I believe, Chinese holdings are near a record low.
• 3:14
  Megan Horneman: So this is putting pressure on interest rates.
• 3:16
  Megan Horneman: And as a result, we're seeing the equity markets weaker today as well.
• 3:20
  Megan Horneman: That's all we have today.
• 3:21
  Megan Horneman: If you want to history of our podcast, you go to marketswithmegan.fm.
• 3:24
  Megan Horneman: Thank you.