US inflation stays stubbornly high

<p>Kia ora,</p><p>Welcome to Thursday’s Economy Watch where we follow the economic events and trends that affect Aotearoa/New Zealand.</p><p>I'm David Chaston and this is the international edition from Interest.co.nz.</p><p>And today we lead with news all eyes are in the latest inflation updates.</p><p>But first, <a href="https://www.mba.org/news-and-research/newsroom/news/2023/09/13/mortgage-applications-decrease-in-latest-mba-weekly-survey" target="_blank"><strong>mortgage applications</strong></a> in the US fell -0.8% last week, following a -2.9% drop in the previous week and hitting a new 27 year low, since December 1996. This was even after adjusting for their Labor Day holiday weekend. Getting the blame are higher mortgage interest rates, with the benchmark 30 year rate edging up by +6 bps to 7.27% plus points, getting close again to high levels not seen since December 2000.</p><p>The American <a href="https://www.bls.gov/news.release/cpi.nr0.htm" target="_blank"><strong>CPI inflation rate for August</strong></a> came in perhaps only slightly higher than expected. But it was a rise for a second straight month, taking the annual rate to 3.7% from 3.2% in July, above market forecasts of 3.6%. Oil prices have been on the rise in the previous two months, which coupled with base effects from last year, have been the main reason. The more recent month-on-month change was a rise of +0.6% and exactly as expected. Stripping out the volatile food and energy items, 'core inflation' fell to a 4.3% annual rate, its lowest in two years.</p><p>The Americans release their producer price inflation levels tomorrow and they are expected to be about half the consumer levels.</p><p>Will these price numbers motivate the US Fed to make another hike? We won't know until today week after their next review meeting. Markets doubt another hike is coming although there are some talking up the possibility.</p><p>There was something of a surprise in the August release of the US <a href="https://www.fiscal.treasury.gov/files/reports-state