US Inflation Data Raises The Odds Of A September Fed Hike
- August CPI puts Fed’s resolve to the test - Rate hike looms as inflation tests Fed credibility - PPI print point to persistent inflation pressures - Market odds reach 90% as banks back September move
The Federal Reserve is a step closer to raising interest rates next week, according to commentators, following this week’s release of August inflation data.
Figures from the Bureau of Labor Statistics showed headline CPI rose 0.4% on the month (0.396% unrounded), in line with expectations and up from July’s 0.1% increase. Consumer prices rose 3.4% in the 12 months to August, matching both the consensus estimate and July’s reading.
Core CPI, which excludes food and energy, increased 0.3% on the month (0.290% unrounded), a tenth of a percentage point faster than July’s pace. Annual core inflation slowed to 2.4% from 2.5% in July.
The BLS said gasoline accounted for more than a third of the monthly headline increase, while energy prices overall rose 2.1%. Shelter costs increased 0.3%, following a 0.1% rise in July. Food prices edged up 0.1%, with prices for food away from home increasing 0.3%.
Within core CPI, prices rose for communication, lodging away from home, airline fares, education, and used cars and trucks. Medical care and motor vehicle insurance prices declined.
The closely watched supercore measure rose 0.511% m/m, up from 0.189% in July. Its annual rate accelerated to 3.022% from 2.843%.
Pipeline pressure
Thursday’s producer price index report, which measures prices received by domestic producers for their goods and services, offered an early indication of August’s inflation pressures.
Headline PPI rose 0.4% month on m/m, matching expectations and accelerating from July’s 0.1% increase. Annual producer price inflation reached 5.4%. Core PPI rose 0.2% on the month, below both the 0.3% consensus forecast and the previous reading.
Barclays economist Pooja Sriram said the bank’s estimates put August core PCE inflation, the Fed’s preferred underlying inflation gauge, at 0.25% m/m and 3.4% y/y. The estimate incorporates the new methodology, which is due to take effect with the official August release at the end of September.
The two-year US Treasury yield rose immediately after the CPI release as traders increased bets on a Fed rate hike. Interest rate futures priced in roughly a 90% chance of an increase next week, up from 70% before the release, with two further increases priced in before year-end.
Several bank economists revised their forecasts for next week’s Federal Open Market Committee meeting following the data.
“We think this week's inflation data clears the path for a 25-basis points Fed rate hike in September,” said Sriram. With both monthly core CPI and estimated core PCE inflation near 0.3% in August, she argued that the figures were unlikely to convince policymakers that inflation was converging to target “clearly and at sufficient speed.”
JPMorgan’s Michael Feroli also expects the committee to raise the federal funds target range by 25 basis points to 3.75–4.00%. “We think it’s a closer call than the market is pricing, but at the end of the day the Chair’s repeated stern warnings on inflation intolerance risk institutional credibility absent some action to back it up.”
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- August CPI puts Fed’s resolve to the test
- Rate hike looms as inflation tests Fed credibility
- PPI print point to persistent inflation pressures
- Market odds reach 90% as banks back September move
By Harry Daniels
LiveSquawk News
@HarryDaniels71
18:00 GMT | 11 September 2026
The Federal Reserve is a step closer to raising interest rates next week, according to commentators, following this week’s release of August inflation data.
Figures from the Bureau of Labor Statistics showed headline CPI rose 0.4% on the month (0.396% unrounded), in line with expectations and up from July’s 0.1% increase. Consumer prices rose 3.4% in the 12 months to August, matching both the consensus estimate and July’s reading.
Core CPI, which excludes food and energy, increased 0.3% on the month (0.290% unrounded), a tenth of a percentage point faster than July’s pace. Annual core inflation slowed to 2.4% from 2.5% in July.
The BLS said gasoline accounted for more than a third of the monthly headline increase, while energy prices overall rose 2.1%. Shelter costs increased 0.3%, following a 0.1% rise in July. Food prices edged up 0.1%, with prices for food away from home increasing 0.3%.
Within core CPI, prices rose for communication, lodging away from home, airline fares, education, and used cars and trucks. Medical care and motor vehicle insurance prices declined.
The closely watched supercore measure rose 0.511% m/m, up from 0.189% in July. Its annual rate accelerated to 3.022% from 2.843%.
Thursday’s producer price index report, which measures prices received by domestic producers for their goods and services, offered an early indication of August’s inflation pressures.
Headline PPI rose 0.4% month on m/m, matching expectations and accelerating from July’s 0.1% increase. Annual producer price inflation reached 5.4%. Core PPI rose 0.2% on the month, below both the 0.3% consensus forecast and the previous reading.
Barclays economist Pooja Sriram said the bank’s estimates put August core PCE inflation, the Fed’s preferred underlying inflation gauge, at 0.25% m/m and 3.4% y/y. The estimate incorporates the new methodology, which is due to take effect with the official August release at the end of September.
The two-year US Treasury yield rose immediately after the CPI release as traders increased bets on a Fed rate hike. Interest rate futures priced in roughly a 90% chance of an increase next week, up from 70% before the release, with two further increases priced in before year-end.
Several bank economists revised their forecasts for next week’s Federal Open Market Committee meeting following the data.
“We think this week's inflation data clears the path for a 25-basis points Fed rate hike in September,” said Sriram. With both monthly core CPI and estimated core PCE inflation near 0.3% in August, she argued that the figures were unlikely to convince policymakers that inflation was converging to target “clearly and at sufficient speed.”
JPMorgan’s Michael Feroli also expects the committee to raise the federal funds target range by 25 basis points to 3.75–4.00%. “We think it’s a closer call than the market is pricing, but at the end of the day the Chair’s repeated stern warnings on inflation intolerance risk institutional credibility absent some action to back it up.”