The U.S. Labor Department will release August consumer price index data at 20:30 Beijing time on Sept. 11, with markets expecting headline CPI to rise 0.4% month over month and 3.4% year over year. Core CPI is expected at 0.2% on the month and 2.4% on the year. The report is being treated as a key reference point for whether the Federal Reserve moves next week with what the source described as its first rate increase in more than three years.
Inflation report lands just before the next Fed decision
The Fed last raised rates on July 26, 2023, delivering a 25-basis-point increase that lifted the target range for the federal funds rate to 5.25%-5.50%. That leaves the August CPI release at the center of market attention ahead of next week’s policy meeting.
U.S. August PPI rose 5.4% from a year earlier, above July’s 4.8%. At the same time, the source said the Iran war pushed U.S. oil prices above $100 a barrel. Together with transportation, supply-chain and tariff costs, that has put added focus on whether energy inflation is feeding through to core goods and services prices.
Core monthly CPI seen as the key reading
Traders are watching the monthly core CPI figure most closely. According to the analysis cited in the source, a 0.2% increase could leave room for the Fed to hold rates steady. A 0.4% reading, by contrast, could materially strengthen the case for a hike.
If the number comes in at 0.3%, traders may look more closely at the unrounded data as well as subcomponents including housing, services and core goods.
Market pricing and institutional views diverge
CME FedWatch data shows the market is currently pricing in about a 70% chance that the Fed will raise rates by 25 basis points in September, taking the policy rate to a 3.75% to 4% range.
Views from major institutions differ. Bank of America said that even a CPI print in line with expectations could still be enough to support a rate hike. Nomura, on the other hand, expects the Fed to keep rates unchanged.