The economists surveyed by Bloomberg expect the headline rate to rise stronger again month-on-month compared to last month (to 0.2%) and the MoM change of the core rate at least not to fall further (still +0.3%). However, the consensus for the latter was still at 0.2% on Wednesday morning. Our economists take a similarly narrow view of the data, expecting +0.25% in each case. Nuances will likely determine the rounding. This makes it almost impossible to predict the (short-term) reaction of the USD. Accordingly, I will refrain from doing so at this point.

As long as core inflation continues to stabilise at a level between 0.2% and 0.3% MoM, it is still a tad too high. Probably not high enough to justify the current level of interest rates forever, but also too high to justify more than 150 bps of rate cuts this year. And this is where the second decimal point is likely to become relevant again in the medium-term.

For stronger rate cuts and, above all, an even stronger turnaround on the part of Fed officials, we would probably need to see figures that are a little bit below 0.2% MoM. Although this is not expected today, the second decimal point could become important for the USD in the medium-term.