August inflation print raises odds of Fed interest-rate hike next week

FEDWATCH: “.. By our estimates, it likely added 0.20–0.35 points to August CPI, and with diesel pushing above $6/gallon in September (+6.4% MTD), continued gains would add another 0.05–0.10 points to the September headline print.” @gasbuddyguy.bsky.social

*TRADERS PRICE IN ABOUT 90% CHANCE OF FED RATE HIKE NEXT WEEK

Indeed, there's now a 90% chance of a rate hike before election day. (Poor Silent Kevin... I fear he's going to get a call.) Indeed, that's a 58% chance of one hike, and a 31% chance of two hikes. Markets don't believe the Fed will respond to Trump's threat to tariff the Fed if it raises rates.

That 0.3 percent on core is above expectations. Unless there are other quirks hiding in these numbers, that makes a Fed hike next week more likely.

Further to the prior post on US inflation: Headline CPI rose 0.4% in August, matching consensus, while core inflation exceeded expectations at 0.3%. Immediate market reactions include a rise in yields and an increase to above 80% in market expectations for a rate hike next week. #economy #inflation

US August CPI Diffusion Indices: presented for your perusal. Note that 15.9% of the index is advancing above 4% year-over-year and 63.5% are increasing between 2% and 4%. This is not what disinflation looks like. All Fed decisions are judgement calls. #Econ #EconSky

Firm August core CPI inflation and PCE translation likely locks in a rate hike...and probably not just one. Inflation is not necessarily accelerating, but nor is it moving to the Fed's 2% target

Hi Trump. “Inflation …consumer prices rising 3.4% from a year earlier, coming in slightly higher than economists had forecast as gasoline costs kept prices elevated. The hotter-than-expected report increases likelihood that Fed will issue 1st interest rate hike in more than 3 years”

Just imagine this scenario next week: Fed hikes but does it all on the back of non-chair votes, Warsh dissents and I'm honestly not sure what Williams would do, though he's dissented zero times as a policy maker. It could happen!

Elevated Inflation Keeps Pressure on Fed to Raise Interest Rates U.S. inflation showed little improvement in August, running at a 3.4 percent annual rate. Investors believe the Federal Reserve is very likely to raise rates at its meeting next week. www.nytimes.com/live/2026/09...

BofA: "The CPI data were stronger than expected ... After incorporating the data, we are now tracking core PCE at 0.30% m/m and 3.4% y/y. This was the last data point the Fed will get before next week. It should clear the way for a hike next week"

CPI for all items increases 0.4% in August; gasoline rises #BLSData www.bls.gov/news.release...

This isn't a good CPI number and boxes the Fed into a hike next week. My proxy for underlying core inflation (blue) has bounced back quite strongly. Some of that is noise, but that's beside the point. If the Fed doesn't hike now, the long end goes crazy... robinjbrooks.substack.com/p/will-the-f...

Bull case tactically rn would seem to be some mix of “Warsh pulls off a dovish hike” or “Fed surprises with no hike” or “peace in the middle east breaks out ahead of midterms” or “something something AI earnings”

Kevin Warsh doesn't have to hike interest rates. But after Jackson Hole and today's CPI reading, he's going to face some very difficult questions if he doesn't.