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

Per today's CPI report, Trump's war with Iran has caused an inflation bomb: Gas prices are up 27% compared to last year, airfare is up 23%, and fuel is up a jaw-dropping 52%. We are all paying the price for his warmongering.

New inflation data just landed, and it was hotter than hoped. Federal funds futures markets now put the odds of a rate hike at the next meeting at 86%, up from 72% last night. Don't trust my opinion. Trust the market's. https://youtu.be/RtbNyCq5ZzU

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

August inflation at an annual rate of 3.4%, above the Fed's 2% target. It's been 3.3% or higher since the US attacked Iran. Core CPI elevated too, showing the inflation is reverberating beyond food and energy. During the supposedly horrific 2024, monthly inflation averaged 2.9%, and trended down.

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

Doomerish, but: 1. Iran and Houthis tighten stranglehold on oil trade. 2. Inflationary shock --> Fed rate hike. 3. Yield on US 10-year Treasuries tops 5%. 4. AI companies' debt financing becomes unsustainable. 5. AI bubble pops, markets crash. 6. Global financial crisis.

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

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”

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

Investors are overwhelmingly expecting Federal Reserve to raise interest rates next week after data Friday showed gas prices drove inflation in August to fastest monthly pace since May & consumer prices beyond food & energy rose more than expected. Vote Republicans out!🗳️ apple.news/AQuxYyJqiSEi...

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.

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!

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"