Fed hike probability jumps to 85% as August core CPI rises 0.3%
US consumer prices increased 3.4% annually in August, and traders now price in an 85% chance of a Federal Reserve rate increase next week.
Traders have adjusted their outlook regarding the US central bank following the latest inflation report. The Bureau of Labor Statistics reported that core CPI rose 0.3% in August, beating economist expectations of a 0.2% rise. Headline consumer prices climbed 0.4% monthly and stood at 3.4% year-over-year. These figures have pushed odds of a Federal Reserve rate hike during the September 15-16 meeting to approximately 85%. This marks a significant increase from the roughly 70% probability traded just days prior. The data comes after strong employment reports and follows a higher producer price index reading from earlier in the week. Market participants are now also beginning to factor in the possibility of another rate adjustment by the end of the year. Oil prices rose alongside these developments, though gold saw modest gains around $4,385 per ounce. Energy costs remain elevated due to geopolitical tensions in the Middle East, complicating the Federal Reserve's attempt to return inflation to its 2% target.
