70% Odds of Fed Rate Hike as August CPI Report Looms — SkimNews
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- August CPI report is scheduled for 8:30 a.m. ET Friday — the last major inflation snapshot before the Fed's Sept. 16 rate decision — with economists forecasting 3.3% annual price growth, an easing from May's three-year high of 4.2%.
- Markets are pricing a 70% probability the Fed will raise its benchmark rate to 3.75%-4% at the Sept. 16 meeting, per CME FedWatch, which would mark the first increase since July 2023 after nearly half of Fed policymakers signaled support for a hike this year.
- Fed Governor Christopher Waller said he would consider a hike "if inflation comes in hot," but would hold rates steady if the August CPI shows progress toward the Fed's 2% goal.
- Chair Kevin Warsh told Jackson Hole attendees the Fed "will have work to do" if inflation doesn't drop toward the central bank's 2% target at a "sufficient speed," signaling less tolerance for persistent price pressures.
- Producer Price Index rose 5.4% year-over-year in August, up from 4.8% in July, while U.S. oil prices topped $100 a barrel Thursday and diesel hit an all-time high of nearly $6 per gallon amid Middle East conflict.
- Core CPI is forecast at 2.4% annually, with economists watching whether higher energy prices pass through to goods and services; tariffs (including Trump's intensifying trade war with Canada), rising health insurance costs, and AI expenditures are also cited as inflation drivers.
- Federal Reserve has held its benchmark rate at 3.5%-3.75% since December 2025, meaning next week's decision would end more than two years of policy pause.
Why it matters: A hot CPI print would lock in the Fed's first rate hike since July 2023, raising borrowing costs for consumers and businesses. With PPI already accelerating to 5.4% YoY, diesel near $6/gallon, and oil above $100, the central bank has limited room to look through supply shocks — a move that would ripple through credit card rates, mortgages, and auto loans.
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