August CPI Rises 0.4%, Locks In Fed Rate Hike — SkimNews
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- Bureau of Labor Statistics reported August CPI rose a seasonally adjusted 0.4% for the month, putting the 12-month increase at 3.4%, both in line with the Dow Jones consensus.
- Core CPI climbed 0.3% monthly—0.1 percentage point above forecast—and posted a 2.4% annual rate, the final major inflation print before the Fed's policy meeting next week.
- Gasoline prices surged 3.9%, accounting for more than one-third of the headline index's gain, while the broader energy index rose 2.1% and stood 16.3% higher year-over-year amid Middle East tensions.
- Traders responded by ramping up rate hike odds to approximately 90%, up from roughly 70% before the CPI release, according to the CME FedWatch tracker of fed funds futures prices.
- Chairman Kevin Warsh has committed to returning inflation to the Fed's 2% target and said that if numbers don't improve, "we have work to do," comments widely interpreted as backing a hike, though several key officials have counseled patience.
- Nationwide chief economist Kathy Bostjancic said the report "did not deliver" the continued disinflation needed to hold rates steady, and Nationwide now expects a quarter-point hike next week from the current 3.5%-3.75% range.
Why it matters: A 0.3% core CPI print—0.1 percentage point above consensus—removes the Fed's last plausible reason to hold rates, with markets now pricing a roughly 90% probability of a quarter-point hike at next Wednesday's FOMC vote, ending a funds rate freeze at 3.5%-3.75% that has held all year.
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