August CPI report drops today as Fed rate hike odds climb to 70%

The Bureau of Labor Statistics is releasing the August Consumer Price Index report at 8:30 a.m. ET on September 11, marking the last significant inflation checkpoint before the Federal Reserve convenes on September 15-16. Economists expect the numbers to tell a story of rekindled price pressures, driven largely by a gasoline rebound that’s about to complicate the Fed’s calculus.

The consensus forecast calls for a 0.4% month-over-month increase in headline CPI, a sharp acceleration from July’s modest 0.1% gain. On a year-over-year basis, that would place headline inflation somewhere in the 3.3% to 3.4% range, roughly in line with July’s 3.4% annual reading.

What economists are watching

Core CPI, which strips out food and energy to reveal the underlying inflation trend, is expected to tick up 0.2% month-over-month. That would translate to a 2.4% year-over-year pace, actually a slight deceleration from July’s 2.5% annual core reading.

Average gasoline prices climbed to $4.192 per gallon in August, up from $4.064 in July. Energy prices, after a period of relative calm, have reasserted themselves as an inflationary force.

The rate hike question

Following recent producer price index data and the uptick in oil prices, the probability of a 25-basis-point rate hike at the September 15-16 FOMC meeting has climbed to roughly 70%.

A hotter-than-expected CPI print could push that probability even higher, potentially opening the door to more aggressive tightening rhetoric from Fed officials. A core CPI that comes in below 0.2% would suggest that the disinflation trend in underlying prices remains intact, even as energy costs create noise on the surface.

Why this report carries outsized weight

Sectors most sensitive to interest rate movements, including real estate, utilities, and growth-oriented technology stocks, are particularly exposed. Higher rates increase borrowing costs and reduce the present value of future earnings, making these sectors vulnerable to a hawkish surprise.

Treasury yields have already been creeping higher in anticipation of continued tightening. A CPI miss to the upside would likely accelerate that move, while a miss to the downside could trigger a bid for duration as traders unwind rate hike bets.

Disclosure: This article was edited by Editorial Team. For more information on how we create and review content, see our Editorial Policy.