Core CPI Runs Hot; September Hike Odds Climb to 70%
August CPI landed at 8:30 a.m. ET. The headline matched expectations: 0.4% on the month, 3.4% over the year. The miss is in the core.
Core CPI, which strips out food and energy, rose 0.3% on the month against a 0.2% forecast. The annual core rate held at 2.4%, in line.
That single decimal is what the market read. Fed funds futures now put the odds of a quarter-point increase at next week's meeting near 70%, up from about 60% before the report. The decision comes Wednesday, September 16 at 2:00 p.m. ET (9:00 p.m. in Istanbul).
The headline increase is once again a fuel story. Gasoline rose 3.9% on the month and accounted for more than a third of the all-items increase by itself. Energy rose 2.1% on the month and 16.3% over the year.
Yesterday's PPI said the same thing: a fuel bill.
The core says something else. Shelter rose 0.1% in July and 0.3% in August. Shelter moves with rent, not with pump prices, and it is the line the Fed watches longest.
The reaction is concentrated in bonds. The 10-year Treasury yield jumped 11 basis points in the previous session to its highest level since October 2023, and is flat at 4.94% this morning. Index futures are up about 0.6% after the data. All three major averages closed lower in each of the last four sessions.
Two large results landed after yesterday's close.