US Inflation’s Up-Hill Battle

Optimism that the US Federal Reserve could pause raising interest rates might have taken a back seat after August’s latest US Inflation Data release.

The data release showed that Core CPI on a month-over-month basis remained sticky and came in above expectations at 0.3%. On an annual basis, core inflation is moving lower and came in line with expectations at 4.3%. Headline inflation increased 3.7 year over year, higher than the expected 3.6%, much higher than the 3.2% July data point. Headline CPI monthly for all Urban Consumers (CPI-U) rose 0.6% in August on a seasonally adjusted basis after increasing 0.2% in July.

Energy was the most significant contributor to the monthly all-items increase, accounting for over half of the increase, and the Shelter Index continued to grow for the 40th consecutive month.

US Inflation remains higher than the central bank’s 2% target rate, but looking at the CME FedWatch Tool, there is still a 95% probability that the Fed will pause in raising rates in September. All eyes turn to US retail sales numbers out tomorrow and initial jobless claims ahead of next week’s rate decision.

Sources: US Bureau of Labor Statistics, Bloomberg

Piece written by Barry Dumas, Head of Client Education

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