The U.S. Bureau of Labor Statistics on Sept. 11 released the August Consumer Price Index report. On a seasonally adjusted basis, headline CPI rose 0.4% month over month and 3.4% year over year, both matching the Dow Jones consensus. Core CPI, which strips out food and energy, rose 0.3% from the prior month, 0.1 percentage point above expectations, while the annual core reading was 2.4%, in line with forecasts.
The report was the last major inflation reading before the Federal Reserve meets next week. After the release, market pricing for a 25-basis-point rate increase on Sept. 16 jumped from about 70% to roughly 90%.
Energy led the increase in headline inflation
Energy was the main force behind the rise in headline CPI. The gasoline index increased 3.9% in August and accounted for more than one-third of the overall monthly gain. The broader energy index rose 2.1% on the month and was up 16.3% from a year earlier. The report said the backdrop was oil-price pressure tied to rising tensions in the Middle East.
The food index rose 0.1% on the month, with food at home unchanged. Food prices were up 2.7% from a year earlier.
Shelter, transportation services and airfares also moved higher
Shelter rose 0.3% in August after easing over the previous two months. Transportation services increased 0.5%. Used cars and trucks rose 0.4%, new vehicles gained 0.3%, communication increased 2.3%, airline fares rose 2.7%, and lodging away from home climbed 2.4%.
Declining categories included medical care, down 0.2% on the month, and motor vehicle insurance, down 0.8%.
A preview report by colleagues at Chain News said the stretch in early September when Brent crude climbed to $110 a barrel will not show up until the September CPI report due in mid-October. The energy increase in the August report reflects the period when average oil prices in August were above July levels.
Rate-hike odds rose from around 70% to about 90%
According to CNBC, traders stepped up bets after the CPI release that the Federal Open Market Committee would raise its benchmark rate by 25 basis points. CME Group FedWatch showed the implied probability jumping to about 90%, versus nearly 70% before the data.
The federal funds rate currently stands in a 3.5% to 3.75% range and has not been changed at any point in 2026.
Federal Reserve Chair Kevin Warsh recently said he remains committed to bringing inflation back to the 2% target and that if the numbers do not improve, 「我们还有工作要做」 ("we still have work to do"). The report said markets broadly read those remarks as leaning toward another hike, though several senior officials in recent weeks have argued for a more patient approach. Chain News previously reported that when the July meeting left rates unchanged, three committee members had already voted for a rate increase.
Kathy Bostjancic, chief economist at Nationwide, said, "Chair Warsh and other officials have made clear that rates can remain unchanged only if inflation continues to slow, and today’s August report did not deliver that." She added that rising oil, gasoline and diesel prices have deepened concerns that elevated energy costs could spill over into other goods, services and inflation expectations. Nationwide now expects the Fed to raise rates by 25 basis points next week.
Next key date is Sept. 16
Before the release, markets treated a 0.3% monthly core CPI reading as the dividing line. The result came in right on that line. The FOMC will meet next week and announce its decision on Sept. 16. It will be the first meeting since Warsh took office where the implied odds of a hike are as high as about 90%.
In crypto markets, Bitcoin traded around $77,700 after the data, up about 1.1% over the past 24 hours. Ether traded around $2,500, up about 3.6% over the same period.