US Core Inflation In Line with Expectations as Market Fully Expects Fed to Hold Rates

The U.S. inflation for August posted the largest monthly increase this year as Americans faced higher energy prices that was also a driving force for other items.

The consumer price index rose 3.7% in August from a year ago, which was slightly higher than a 3.6% rise surveyed by Dow Jones. Meanwhile, a seasonally adjusted inflation rose 0.6% for the month, in line with the forecast.

However, core inflation, which excludes volatile food and energy prices, rose 0.3% MoM and 4.3% YoY, compared to a 0.2% MoM and 4.3% expected. 


According to CME FedWatch Tool, the market is now giving a probability of 97% that the Fed will not raise interest rates in the meeting on September 20, which increased from a 92% chance a day prior. The Federal Reserve officials normally focus more on core inflation as it is a better indication for where inflation is heading in a long term. 

The meeting in November, which would be one of the last two of this year, now has 57.8% odds for the central bank to hold rates, which is a slight increase from 55.8% yesterday, and the chance for a 25bps hike is 41%.