Inflation Expectations Falling Fast Along With Pump Price

We believe that it is the pump price of gasoline prominently posted daily at every service station in America that has the most immediate and largest effect on inflationary expectations. It soared earlier this year and so did inflationary expectations, which fell sharply during July and August along with gasoline prices (chart below).

August's CPI is out tomorrow morning and is expected to be down 0.1% m/m led by a big drop in the price of gasoline, following July's flat reading. Excluding food and fuel, the CPI is expected to be up 0.3% during August, the same increase as in July.