The August U.S. CPI report is finally here, and the numbers are important.

Headline CPI rose 0.4% MoM and 3.4% YoY, exactly in line with expectations. The more important signal came from Core CPI: +0.3% MoM, above the 0.2% forecast, while annual Core CPI eased slightly to 2.4% from 2.5%. Gasoline prices jumped 3.9%, accounting for more than one-third of the monthly CPI increase.

My view: this report is not hot enough to panic markets, but it is too sticky for the Fed to ignore.

The Fed funds rate is currently 3.50%–3.75%, and inflation remains clearly above the Fed’s 2% objective. After the CPI release, markets sharply increased their expectations for a rate hike at next week’s Fed meeting.

I currently lean toward a 25 bps hike.

For risk assets, the bigger question is not just whether the Fed hikes once. It is whether this CPI print, higher energy prices and persistent core inflation mark the beginning of another tightening cycle.

That would be a much bigger issue for stocks and crypto.

My bias: cautious short term.

What do you think : hike or hold?

#CPIWatch