Decided on Thursday

The inflation number lands at 8:30 this morning. The decision it was supposed to inform got made yesterday afternoon.

• The odds on a quarter-point hike next Wednesday went from 52% to 64% on Polymarket during Thursday, with August CPI still unprinted (Polymarket). The inflation forecast barely moved. The 3.4 bucket went 48 to 52 and has since settled back to 48.
• What moved was producer prices. August PPI rose 0.4% on the month and 5.4% over the year, and more than three quarters of that came from energy, which climbed 4.2%. Diesel alone rose 24.1% in a single month (BLS).
• The argument has quietly changed shape. On the how-many-hikes market, one hike this year is at 44%, two is at 25%, three is at 10%. Two or more carries 35%, up from 31% on Thursday morning (Polymarket). In March the committee’s own median had this year ending at 3.4% and no hikes in it at all.

Who pays: diesel

Diesel is not a household purchase for most people, which is why a 24.1% monthly jump reads as somebody else’s problem. It moves freight. Freight is inside the price of everything that arrives at a grocery store on a truck, which is nearly all of it.

The lag is weeks, not days. So yesterday’s producer number is really a preview of what you pay in October, and the Fed knows it, which is most of why the hike repriced before anyone saw a consumer number.

Threshold, 8:30

Consensus is 3.4% (Kiplinger). As of this morning, Polymarket has 3.3 at 30% and 3.4 at 48%, so 78% of the money sits on one of those two, and either is a Friday. That split has swung around all week without changing the answer.

Here is what changed since yesterday. With the hike already in the sixties, a hot print no longer decides anything; it confirms. What is still live is the second hike. A 3.5 or higher, 18% of the money, and I would expect the two-or-more market to move first and September to go from likely to settled. A 3.2 or lower, about 9%, is the only outcome left that can still surprise anyone, and it would put the hold camp back in a room they were escorted out of on Thursday.

I score it at 8:31, with this paragraph quoted, so nobody has to trust my memory of what I expected.

The Bug Report

First Friday column. One ticket. Our own miss goes first.

TOR-0002
Expected:        "The print decides how loud the answer is."
                 The Overnight Rate, Issue 002, Sept 10
Actual:          The hike repriced 52 to 64 during Thursday, on producer
                 prices and energy, with CPI still unprinted.
Severity:        Medium. A reader who took that line literally and waited
                 for Friday watched a twelve point move without him.
Owner:           The Overnight Rate
Odds at filing:  Sept 16 hike 64% (Polymarket, Thursday evening)
Status:          Won't fix. The threshold held. The assumption that the
                 consumer print was the only live input did not.

The FOMC dots miss, the energy-as-tailwind miss, and this morning’s CPI ticket stay on the backlog until /bugs is live.

Headlines

• The White House paused its decision on refined copper tariffs over affordability concerns (Reuters via AOL), and copper miners sold off with it. The Section 232 copper market moved too, from 34% on Monday to 25% by Thursday evening (Polymarket). When a policy market drops nine points in three days, somebody with money believes the pause is real.
• TSMC reported August revenue up 53% from a year earlier (CNBC). Chip demand is not the constraint on the AI buildout. Power is, and that shows up on a utility bill before it shows up in anyone’s earnings.
• Brent crude hit its highest level since July. Every model that had energy pulling inflation down this autumn now has it pushing the other way.
• Oracle’s capital commitment of $70 billion to $95 billion drew questions about whether the spending returns anything. The question worth asking is who carries the interest if it does not.

Wednesday has been on the calendar since December. Today only decides how few people are still arguing about it.