This is a week when stocks could turn around and head up, with concerns about how fast interest rates will rise. It will all depend on the data drop here and in the US, but if the news doesn’t say interest rates are working to bring inflation down, stocks will slide.

Without a doubt, the big number for stocks and interest rates comes on Tuesday in the US with the release of the August inflation number. That means we’ll wake up to the news on Wednesday morning and stocks, as well as interest rate speculation, will be affected by what the US Consumer Price Index (CPI) tells us.

In simple terms, the June number was 9.1%. July came with a better-than-expected 8.5%, so August has to be lower to get stock players buying.

If the number doesn’t fall significantly, it has to draw into question how effective the Fed’s very aggressive interest rate rising policy has been.

This is what The Financial Times has reported on the subject: “Economists polled by Reuters forecast that the US consumer price index fell 0.1 per cent month-on-month in August, after remaining flat in July. They expect a year-on-year reading of 8.1 per cent for August, down from 8.5 per cent a month earlier”.

Guessing inflation numbers isn’t easy, so a surprise to either the downside or the upside is very possible, but you can be certain if the figures say rate rises are lagging in effect, stock market influencers will be thinking the Fed could raise interest rates by 0.75% on September 20-21 and even in early November. That wouldn’t be great for stocks in the US and here.

And on the local front, our Dr Phil Lowe of the Reserve Bank is said to be happy to play follow the leader with Jerome Powell of the Fed. If the Yanks are having trouble taming this special type of inflation that has come out of the pandemic, then he could think: “We might too.”

So, there’s this potential US influence on what he might do to our interest rates. Then there’s our own data drop over September, which is pretty important this week.

Let’s see what looms locally, data-wise, this week:

1. CBA’s take on household spending, which needs to show the rate rises are curtailing spending. If it doesn’t, the RBA could go another 0.5% in October.

2. Consumer sentiment needs to not look too positive.

3. NAB’s business conditions and confidence readings need to look like rate rises are hurting the sector, both now and looking forward.

4. The August jobs reports should show a rise in unemployment and slower job creation. The July jobless number was 3.4%. If this falls further, the RBA won’t ease up on its 0.5% rate rise next month!

As you can see, there’s a lot to create plenty of media speculation about how the RBA and the Fed will move on interest rates this week. If it’s largely good news that reflects that the rate-rising policies are working, stocks will fight gravity. However, if the statistical tidings are negative, stocks will sell off.

Who said stats are boring?