Tonight’s CPI is out! Will it settle the question and determine whether the Fed delivers the first rate hike in more than three years?
At 20:30 Beijing time on September 11, the U.S. Department of Labor will release August consumer price index (CPI) data. Market participants view this report as the most critical “deciding gong” before the Fed’s policy meeting next week—it is likely to directly influence whether the Fed, at its meeting on September 15–16, begins its first rate hike since July 2023. The current target range for the federal funds rate is 3.50%–3.75%, which has been held for months. The CME FedWatch tool shows the probability that the market expects a 25-basis-point hike next week—raising the range to 3.75%–4.00%—has climbed to about 70%. Earlier, strong employment data, rising oil prices driven by Iran-related conflict (with Brent crude temporarily breaking above $100 per barrel), and factors such as tariffs have all increased concerns that inflation could be ticking back up. The August producer price index (PPI) released last week was also on the hot side, further reinforcing this outlook. Market consensus is that headline CPI will rise about 0.4% month over month and about 3.4% year over year; excluding food and energy, core CPI is expected to rise 0.2% month over month and about 2.4% year over year. What’s truly under the microscope is the core data—if it comes in at only 0.2% or lower, it may leave room for the Fed to hold steady; if it reaches 0.3% or higher, the probability of a rate hike will increase significantly. Previously, there has been disagreement within the Fed, with some officials clearly stating that August’s inflation performance will have a major impact on their voting stance. Let’s wait for the data to be revealed.
At 20:30 Beijing time on September 11, the U.S. Department of Labor will release August consumer price index (CPI) data. Market participants view this report as the most critical “deciding gong” before the Fed’s policy meeting next week—it is likely to directly influence whether the Fed, at its meeting on September 15–16, begins its first rate hike since July 2023. The current target range for the federal funds rate is 3.50%–3.75%, which has been held for months. The CME FedWatch tool shows the probability that the market expects a 25-basis-point hike next week—raising the range to 3.75%–4.00%—has climbed to about 70%. Earlier, strong employment data, rising oil prices driven by Iran-related conflict (with Brent crude temporarily breaking above $100 per barrel), and factors such as tariffs have all increased concerns that inflation could be ticking back up. The August producer price index (PPI) released last week was also on the hot side, further reinforcing this outlook. Market consensus is that headline CPI will rise about 0.4% month over month and about 3.4% year over year; excluding food and energy, core CPI is expected to rise 0.2% month over month and about 2.4% year over year. What’s truly under the microscope is the core data—if it comes in at only 0.2% or lower, it may leave room for the Fed to hold steady; if it reaches 0.3% or higher, the probability of a rate hike will increase significantly. Previously, there has been disagreement within the Fed, with some officials clearly stating that August’s inflation performance will have a major impact on their voting stance. Let’s wait for the data to be revealed.