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Core inflation in the US appears to be losing steam, and Wall Street is paying close attention. Analysts project that the Bureau of Labor Statistics will report August’s core Consumer Price Index at somewhere between 2.3% and 2.4% on a year-over-year basis, down from July’s 2.5% reading.
The data drops on September 11 at 8:30 a.m. ET, right in the window where the Federal Reserve is finalizing its thinking ahead of the September FOMC meeting.
What the numbers look like
July’s core CPI, which strips out volatile food and energy prices, came in at 2.5% year-over-year with a 0.2% month-over-month gain. That was already the softest annual reading in five months.
For August, TD Securities has penciled in a 2.3% year-over-year figure, with a month-over-month increase of roughly 0.19%. Other forecasters are clustered slightly higher, around 2.4%.
Polymarket, the prediction market platform, is telling a similar story. Traders there are pricing a 42% probability that core CPI lands at 2.4% year-over-year, with a 34% chance it comes in at 2.3%.
On the headline side, the all-items CPI is expected to hold at approximately 3.4% year-over-year.
Why core inflation is slipping
The main driver pulling core CPI lower is a continued decline in goods prices. Think categories like used cars, apparel, and household furnishings, segments where post-pandemic price surges have been steadily unwinding.
Services inflation, meanwhile, remains stubbornly firm. Shelter costs in particular continue to prop up the services component. Rent and owners’ equivalent rent don’t turn on a dime, even when the broader economy cools.
Analysts have also flagged upside risks from tariff-sensitive goods categories. If import duties on certain products push retail prices higher, that could partially offset the broader disinflation trend in goods.
What it means for the Fed and markets
The September FOMC meeting is the big event on the horizon, and this CPI print will be one of the last major data points the committee digests before making its rate decision.
The flip side matters too. If core CPI comes in hotter than expected, say at 2.6% or above, markets have been pricing in a cooperative inflation backdrop, and a disruption to that narrative would force rapid repositioning across asset classes.
The August report will also provide clues about whether the disinflation trend has legs heading into the fourth quarter. July’s soft print could have been a one-off, or it could mark the beginning of a sustained move toward the Fed’s 2% target on core measures. Two consecutive readings of deceleration would make the dovish case considerably easier to argue.
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