US DATA: Volatile Medical Services A Major Drag On August Core CPI
Core goods prices (as opposed to services) drove the broader sequential increase in core CPI in August to 0.35% from 0.32%, which in turn was due entirely to vehicle price rises. See table below for percentage point contributions to core CPI vs July's report (note contributions don't add up exactly due to rounding).
- As implied by the moderation in supercore, the cooling on overall core services' contribution to core CPI came despite a decent pickup in shelter inflation, including both housing and lodging (combined represented a bit more than half of all core CPI at a 0.19pp contribution, up 0.10pp from the prior month).
- Conversely, the big downside sequential drag was in medical services, which - driven by deflation in dental services, and to a lesser extent hospital services - saw a multi-year lows after multi-year highs in July. Smoothing it out, though, medical care services CPI is running at about a 5% 3M/3M annualized rate and the August drop looks like an anomaly.
- This pullback almost singlehandedly offset the increasing sequential pressures from shelter, subtracting 0.01pp from core, 0.08pp less than in July.
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MNI: USDA: 2025/2026 CORN PRODUCTION EST 16.74B BSL
- MNI: USDA: 2025/2026 CORN PRODUCTION EST 16.74B BSL
- USDA: 2025/2026 CORN YIELD EST 188.80 BSL/ACRE
- USDA: 2025/2026 SOYBEAN PRODUCTION EST 4.29B BSL
- USDA: 2025/2026 SOYBEAN YIELD EST 53.60 BSL/ACRE
- USDA: 2025/2026 WHEAT PRODUCTION EST 1.93B BSL
- USDA: 2025/2026 WHEAT YIELD EST 52.70 BSL/ACRE
OPTIONS: Larger FX Option Pipeline
- EUR/USD: Aug14 $1.1590-00(E1.8bln), $1.1625-35(E898mln), $1.1645-50(E1.2bln), $1.1695-00(E4.5bln); Aug15 $1.1590-00(E1.1bln); Aug18 $1.1560(E1.1bln)
- USD/JPY: Aug14 Y147.00-20($1.2bln), Y148.15-30($945mln), Y155.00(Y1.6bln
- GBP/USD: Aug14 $1.2975-00(Gbp1.2bln)
- EUR/GBP: Aug14 Gbp0.8690-05(E1.1bln)
- AUD/USD: Aug14 $0.6600(A$1.3bln)
- USD/CNY: Aug15 Cny7.5000($1.7bln)
US TSYS/OVERNIGHT REPO: SOFR Softens Slightly, Potential Pickup Ahead
Secured rates were a little softer Monday as was broadly expected, with SOFR edging 1bp lower to 4.34%. Other major secured rates and effective Fed funds were unchanged.
- As we noted yesterday, pressure could pick up later in the week on Treasury auction settlements. These include $55B in net cash raised by bills today, and a further $42B on Thursday, followed by $35B in coupon settlements Friday.
REPO REFERENCE RATES (rate, change from prev. day, volume):
* Secured Overnight Financing Rate (SOFR): 4.34%, -0.01%, $2796B
* Broad General Collateral Rate (BGCR): 4.33%, no change, $1173B
* Tri-Party General Collateral Rate (TGCR): 4.33%, no change, $1137B
New York Fed EFFR for prior session (rate, chg from prev day):
* Daily Effective Fed Funds Rate: 4.33%, no change, volume: $115B
* Daily Overnight Bank Funding Rate: 4.33%, no change, volume: $263B
