US CPI core inflation hits 2.4%, sparking 92% probability of Fed rate hike
U.S. Core CPI rose 0.3% in August, matching expectations and setting the stage for a near-certain Federal Reserve interest rate increase next week.
The U.S. Bureau of Labor Statistics reported Friday that core inflation, which excludes food and energy costs, increased by 0.3% in August compared to analysts' forecasts. The annual growth rate remained flat at 2.4%, a level consistent with July data but representing the slowest pace since early 2021. While the core measure matched consensus predictions, monthly prices rose 0.4% in August, marking the fastest acceleration in three months. These figures follow President Warsh's initial policy address, where he suggested financial conditions remained loose despite labor market strength. Markets reacted by pricing in a 91.6% likelihood of a 25 basis-point rate hike at the September 16 Federal Reserve meeting, a sharp jump from roughly 40% prior to his comments and significantly higher than yesterday's reading. The dollar edged up against the euro and Swiss franc following the data release. In European markets, German, French, and Italian government bond yields climbed as inflation fears intensified global debt market volatility. Bitcoin returned to $79,000 after falling briefly earlier in the day. Juan Perez of MonexUSA noted that accelerating core CPI tends to increase odds for a Federal Reserve policy tightening. The 15-year Treasury yield reached multi-year highs near release.
