Fed September Hike Odds Hit 70% on PPI, $100 Oil — SkimNews
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- CME Group's FedWatch gauge priced September rate hike odds at 70% on Thursday after August PPI rose 0.4% to an annual 5.4% and U.S. crude crossed $100 a barrel.
- U.S. crude oil surged 4% to just over $100 a barrel as intensified Middle East hostilities spooked commodities traders, layering fresh inflation pressure on top of the PPI print.
- The European Central Bank announced a quarter-point hike and raised its inflation forecast, warning the Iran war would inflict deeper and longer-term economic impacts.
- Bank of America's Stephen Juneau estimated core PCE is tracking at a 0.26% monthly pace based on the August PPI data, projecting three Fed hikes ahead; BofA holds one of Wall Street's most hawkish Fed forecasts.
- Fed Chairman Kevin Warsh reaffirmed the Commerce Department's PCE price index as the Fed's official inflation yardstick, with July core at 3.3% and headline at 3.7%.
- Peter Boockvar of One Point BFG Wealth Partners argued even a soft CPI reading would only signal companies absorbing higher costs, calling PPI evidence of a continuing supply-chain inflation problem.
- December rate hike odds climbed to nearly 60% as traders priced in a second move, with Friday's CPI report (consensus: headline 3.4%, core 2.4%) giving policymakers their final inflation read before the meeting.
Why it matters: The combination of sticky wholesale prices, $100+ crude, and a hawkish ECB gives Fed policymakers cover to hike next week after months of market expectation that rates would hold. If Friday's CPI confirms Bank of America's 0.26% monthly core PCE estimate, a December follow-up at near-60% odds becomes the base case, tightening financial conditions just as oil-driven inflation ripples through the global economy.
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