Persistent inflation in August has increased the likelihood that the Federal Reserve will raise interest rates by a quarter point at its meeting next week, according to market pricing.
Key facts
- The all-items consumer price index was expected to rise 0.4% in August, according to the Dow Jones consensus.
- Core CPI, excluding food and energy, was expected to show a 0.2% gain.
- Odds of a quarter-point Fed rate increase next week rose to nearly 86%, according to the CME FedWatch tool.
- Those odds stood at 72% on Thursday before the data.
- The Fed meeting is scheduled for next week.
Inflation persisted in August, according to CNBC, potentially locking in an interest rate increase from the Federal Reserve at its meeting next week.
The all-items consumer price index was expected to rise 0.4% in August, CNBC reported, citing the Dow Jones consensus. Core CPI, which excludes food and energy prices, was expected to show a 0.2% gain over the same period.
The persistence of inflation shifted expectations across financial markets. According to CNBC, the print was enough to raise the chances of a quarter-point Fed rate increase next week to nearly 86%.
That marked a notable jump from earlier in the week. The odds stood at 72% on Thursday before the latest reading, according to the CME FedWatch tool, which tracks market-implied probabilities of Fed policy moves.
The data comes ahead of the central bank’s meeting next week, where policymakers are expected to weigh the latest inflation figures as they decide on interest rates.
Why it matters
Interest rate decisions by the Federal Reserve directly affect the cost of borrowing for households and businesses, from mortgages to credit cards. A rate hike signals the central bank's continued effort to bring inflation under control, which can shape spending, saving and investment decisions across the economy.
Frequently asked questions
What were inflation figures expected to show in August?
The all-items consumer price index was expected to rise 0.4% in August, with core CPI, excluding food and energy, expected to gain 0.2%, according to the Dow Jones consensus reported by CNBC.
How likely is a Fed rate hike next week?
According to the CME FedWatch tool, the chances of a quarter-point Fed rate increase next week rose to nearly 86%, up from 72% on Thursday.
When is the Federal Reserve meeting?
The Federal Reserve is scheduled to meet next week, when it will decide on interest rates.