BCE, PPI: The Two Events Shaping Inflation

Two verdicts, one Thursday. Last night, Christine Lagarde was dining in Berlin with the head of the Bundesbank and Chancellor Friedrich Merz. The monetary policy meeting they were opening then will conclude this Thursday. The verdict of the European Central Bank (ECB) will be announced at 2:15 PM.

Fifteen minutes later, a far less glamorous American index will take over across the Atlantic: the producer prices for the month of August. Two publications, one common thread: the interest rates on both sides of the Atlantic. They create or destroy the appetite for risk, including cryptocurrencies.

• Christine Lagarde participated in a monetary policy meeting in Berlin before the ECB delivers its verdict this Thursday at 2:15 PM, under pressure from inflation in the eurozone.
• In the United States, the producer price index published just after could influence the Fed's decision regarding a potential interest rate hike.

The verdict will be announced at 2:15 PM, Berlin time, which is the same as Paris time since both capitals share the same time zone. The press conference with Christine Lagarde follows at 2:45 PM. The inflation in the eurozone rose from 2.9% to 3.3% year-on-year between July and August, driven by energy prices. According to Josefina Rodriguez, an economist at Vanguard, a 25 basis point increase is expected, which would raise the deposit rate to 2.50%. A second increase is anticipated in 2026, following the one in June, and likely the last before a pause.

The political context does not help. Berlin would like to see Joachim Nagel, head of the Bundesbank, succeed Christine Lagarde at the helm of the institution. This scenario has been circulating in the German press for several weeks without any official announcement confirming it. Nothing official, of course, but last night's dinner likely had its share of intrigue.

The producer price index (PPI), which measures inflation from the producers' side rather than consumers, will be released at 8:30 AM Washington time, which is 2:30 PM in Paris. The market expects a monthly increase of 0.4% compared to 0% in July, which would bring the annual rate to 5.3% compared to 4.7% the previous month. The core PPI, excluding food and energy, is expected to rise by 0.3% month-on-month and 4.6% year-on-year.

This anticipated rebound is mainly due to energy prices, which have risen after Brent surpassed $100 a barrel on September 9.

The publication arrives in an already tense context. The report from the Bureau of Labor Statistics on American employment in August shattered expectations at the beginning of September, with 162,000 jobs created against 55,000 expected. A figure above expectations this Thursday would further strengthen bets on a rate hike by the Fed. A more modest figure would leave room for the CPI, which is released tomorrow, to make the call.

The ECB and the Bureau of Labor Statistics are delivering two pieces of the same puzzle this Thursday, that of inflation that refuses to conform. In the eurozone, it is already forcing Christine Lagarde's hand towards another increase. In the United States, it is setting the stage for tomorrow's CPI and the Fed meeting on September 15 and 16.

Bitcoin, which lost 2% in a matter of minutes after the last employment report, remains at the mercy of the same mechanism. Each macro publication, whether European or American, reshapes the interest rate gap between the two zones, and this gap directly impacts the dollar and the appetite for risk assets.

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