U.S. August CPI Up 0.4%, Boosting Odds of Fed Rate Hike

BlockBeats reports that U.S. inflation picked up in August as gasoline prices rebounded after two straight monthly declines, reinforcing market expectations that the Federal Reserve could raise interest rates next week. The Labor Department's Bureau of Labor Statistics said Friday that the Consumer Price Index rose 0.4% in August, following a 0.1% gain in July. On a 12-month basis through August, CPI increased 3.4%, unchanged from July. Core CPI, which excludes food and energy, rose 0.3% on a seasonally adjusted basis, above the 0.2% consensus forecast. Thursday's data also showed the Producer Price Index accelerating in August, with several PCE-relevant components posting strong gains. Together with last week's robust August jobs report, the figures have fueled expectations of a rate hike at next week's Fed meeting. After the CPI release, markets priced in roughly a 90% probability of a Fed rate increase next week. Some economists argue price pressures could remain sticky as import tariffs recently imposed on Canada—one of the United States' largest trading partners—feed through to costs. Rising living costs, especially for gasoline and food, have increased public discontent. Trump's approval rating has dropped sharply, raising the risk that Republicans could lose control of the U.S. Congress in the November midterm elections. Fed Chair Jerome Powell said last month that if policymakers do not gain enough confidence that inflation is returning to the 2% target, the Fed still “has work to do.”