Pre-market stock: The Fed is fighting inflation. Could deflation be her next battle?

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Federal Reserve Chairman Jerome Powell has a huge problem, and he can’t do anything about it.

Gasoline prices in the United States, which have fallen for 91 consecutive days, are It is expected to have resulted in a slight decrease in prices in August compared to July, according to analysts’ estimates of inflation data due to be released on Tuesday.

This is good news for cash-strapped consumers. But lower prices are not causing everyone on Wall Street to rejoice. Some are starting to use the “D” word: deflation, which is another form of price instability that’s bad for the economy.

What is happening: The headline CPI figure, a closely watched inflation measure, is expected to show that prices actually fell 0.1% between July and August. (Expectations are still for an 8.1% increase over the past 12 months.)

This may sound like a good thing but for some, it’s a cause for concern.

Lower prices can indicate weak demand, and consumer spending makes up a large part of the economy. Markets are volatile that Fed actions – which take time to fuel the system – could overshoot, sending the US economy into a long and deep recession.

Deflation could reverse what we’ve seen lately – a downward spiral in jobs and wages as companies cut production and lay off employees.

Two big names on Wall Street sounded the alarm. Tesla

(TSLA)
CEO Elon Musk, apparently fed up with his anti-Twitter rhetoric, turned to the topic of the central bank, tweet it “Raising the Fed rate too much risks deflation.”

Musk’s tweet came after Cathy Wood, CEO of Ark Invest Also warned About deflation on Wednesday. “The Fed bases monetary policy decisions on lagging indicators: employment and core inflation,” she said.

What the market should remember: “Headline inflation” is called this only because it is the most popular measurement in the media and the most popular among Americans.

But the Fed does not look at this number when determining monetary policy – it uses core inflation, which does not include food or energy. This measure is expected to rise 0.3% between July and August, according to Refinitiv. In fact, Powell has repeatedly said that energy prices are not something the Federal Reserve can control.

“I think a lot of investors react to the headlines or the first paragraph of the story without really going into detail, and there is a lot of strong movement around the Fed. My strong suspicion is that most investors haven’t seen the whole thing [Federal Reserve] Press conference,” Luke Tilley, chief economist at the Wilmington Trust told me.

What about Musk Wood’s comments on Twitter?

“They talk about their books,” Vincent Reinhart, chief economist at Dreyfus-Mellon told me. If you’re a huge stock investor like Elon Musk, you’ll want the Fed to stop hanging out.

Reinhart says he’s worried about the narration for another reason. If market participants are wrongly led to believe that the Fed will not tighten too much, the increases will be very devastating.

“The problem with Musk and Wood talking in this way is that they have a much broader reach in society than people who focus on central banks,” he said. “There is a concern that other views may permeate, and they are unhelpful opinions.”

Bottom line: Inflation remains near historic highs, and nearly a dozen Federal Reserve officials united in their message last week that rate hikes will continue for the foreseeable future. Core and factor inflation is still much higher year over year, and monthly trends are often just noise.

The US credit card industry is taking long-overdue action over illegal arms sales.

American Express

(AXP)
Mastercard and Visa have announced that they will adopt a new merchant category code for gun retailers in the country, The report of my colleague Ramisha Maarouf.

The system will separately categorize sales at gun and ammunition stores, which can help track suspicious transactions for firearms and ammunition. Gun control activists say the change will help report potential mass shootings and arms dealers.

The Geneva-based International Organization for Standardization approved the code on Friday. Nearly every retail item has a dealer class code—but prior to Friday’s decision by ISO, gun store sales were classified under the general merchandise or sporting goods category.

The proposal was first suggested by Andrew Ross Sorkin of DealBook in 2018 after the Parkland shooting.

visa

(Fifth)
and MasterCard

(Master’s)
At first they resisted creating the code, although some executives spoke in favor of it. visa

(Fifth)
She said at the time that she did not consider herself a “moral authority”.

Visa reversed course last week. In a statement on Sunday, the world’s largest payment network said it would “proceed with the next steps while ensuring that all legal commerce on the Visa network is protected in accordance with our longstanding rules.”

There were 479 mass shootings in the United States so far in 2022, according to the Gun Violence Archive, a nonprofit research group.

It’s been a tough few years for Burger King, My colleague Danielle Weiner Bronner told me.

The company is playing catch-up against its rivals after missteps during the pandemic caused it to lag behind other fast food kingdoms.

At the height of the Covid-related closures, restaurants scaled back their menus and simplified their online ordering systems to meet rising demand. Burger King did not.

Burger King owned by Brands International

(QSR)
Equally admits. Jose Seal, chief executive of the Reserve Bank of India, told CNN Business: “We’ve actually complicated things, we’ve added menu items … that were more difficult and not necessarily intuitive and typical for us.”

In the second quarter of this year, sales at US Burger King restaurants open for at least 13 months grew just 0.4%. Sales at US McDonald’s restaurants that open at least 13 months have jumped 3.7% in that period.

But there is a transformation plan: Burger King plans to redesign about 800 restaurants over the next two years. The fast-food chain says it will invest $400 million in brand improvement — $250 million going into restaurant and kitchen technology upgrades and redesigns, and $150 million in advertising and digital products. Franchisees will also invest in improving the brand.

The US Consumer Price Index for August is released at 8:30 AM ET.

today too

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(SBUX)
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▸ Twitter

(TWTR)
Shareholders meeting to vote on Elon Musk’s takeover

Correction: An earlier version of this story miscalculated the number of days that gas prices had fallen in the United States. Tuesday was the 91st consecutive day that prices have fallen.

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