August CPI Is Fed's Final Inflation Read Before Rate Vote — SkimNews
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- Bureau of Labor Statistics will release the August CPI report Friday at 8:30 a.m., the last inflation reading before the Fed's FOMC meeting next Wednesday.
- Dow Jones consensus expects headline CPI rose 0.4% month-over-month with annual inflation at 3.4%, while core CPI is forecast at 0.2% monthly and 2.4% annually.
- CME Group's FedWatch gauge shows traders raised September quarter-point hike odds above 73% following Thursday's PPI release, though the source notes expectations have been volatile and data-dependent.
- Nomura economists said the FOMC decision "hinges on the CPI data" since most PCE components derive from CPI, maintaining their call for no hike but warning an upside surprise would "significantly increase the likelihood of policy firming."
- Fed Chair Kevin Warsh has indicated a reliance on market indicators for monetary policy direction, raising the stakes for market-priced signals ahead of next Wednesday's vote.
- Bill Adams, chief U.S. economist at Fifth Third Commercial Bank, said September's energy price surge "will likely tip the balance towards a hike," though a CPI surprise or a last-minute deal with Iran could still shift the outcome.
- The CPI and Thursday's PPI together will help Fed officials forecast the personal consumption expenditures price index, the Fed's primary inflation gauge, due at the end of September.
Why it matters: With traders pricing a 73% probability of a rate hike and September energy prices pushing in the hawkish direction, a hot core CPI reading Friday could lock in the Fed's first rate increase in months. The source notes a difference of one-tenth of a percentage point in the data may decide between a hold and a hike, directly reshaping borrowing costs for mortgages, credit, and business loans.
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