US core inflation climbs 0.3% in August, pushing Fed rate-hike odds to 85%
Core consumer prices rose 0.3% in August, exceeding forecasts and signaling persistent pressure near the Federal Reserve's September meeting. Trading expectations for a 25-basis-point interest rate increase have jumped to 85% from roughly 70% prior to the data release.
The Bureau of Labor Statistics reported that core prices excluding food and energy increased 0.3% last month, surpassing the 0.2% prediction from economists polled by LSEG and Reuters. Headline consumer inflation reached 3.4% year over year, up 0.1% on a monthly basis, following a lower 0.1% increase in July. Core annual inflation stands at 2.4%, slightly cooling compared to the 2.5% reading from July but remaining above targets.
Market participants are responding by elevating the probability of a policy shift. Traders now assign an approximately 85% chance of a quarter-percentage-point increase to the Federal Reserve's next meeting scheduled for September 15-16, up significantly from earlier estimates.
Federal Reserve Governor Christopher Waller had previously suggested the central bank might maintain rates if cooling data emerged, but the August figures contradict that cautious stance. Rising energy costs and tensions in the Middle East have also fueled producer price increases, complicating efforts to return inflation to the 2% target.
