September CPI Preview: Dropping tonight at 8:30 PM Overall YoY expectations have been raised from 3.4% to 3.6%-3.7%, but core MoM has dropped from 0.3% to 0.2%. The inflation spike is all thanks to gasoline. Right now, the Fed's rate hike pricing shows a 77.3% chance of holding steady in October and a 68.7% probability of a cumulative 25bp hike by December. 10-year U.S. Treasury yield at 5.22%: real yield at 2.92%, the highest since November 2008; breakeven inflation rate at 2.33%, showing the market doesn’t believe inflation is out of control. Brent crude at 106.6, WTI at 95.3—pricing power lies with Hormuz and Riyadh. Oil has been fluctuating for a long time, with prices for commodities like crude typically ranging between 40-70. Global commercial onshore inventories have dropped below 6 billion barrels. Oil prices must come down before the midterm elections. Here’s a counterintuitive point to end on: the lower the CPI, the more bearish the medium-term outlook for crude oil. If core inflation isn’t moving, it’s a sign that demand is too weak to push it higher. OPEC has cut this year’s demand growth forecast six times, from 1.4 million barrels/day at the start of the year to just 180,000 barrels/day now—that’s the proof.