The only question seems to be whether it will be a 25-point or 50-point cut.
In August, the rose to its highest level since January, reaching 2.9%, according to the Consumer Price Index (CPI).
The 2.9% rate is in line with economists’ projections. CPI inflation is from 2.7% in July and is the highest since it hit 3.0% in January.
, which excludes food and energy prices, was 3.1% in August, the same as July. This was in line with estimates. Here’s a breakdown.
- Inflation rate over the past 12 months: 2.9%, up from 2.7% in July.
- in August: 0.4%, up from 0.2%.
- Core CPI over the past 12 months: 3.1%, same as July.
- in August: 0.3%, same as July.
Rising inflation, combined with a slowdown in hiring, make conditions ripe for a when the Federal Open Market Committee (FOMC) meets next week.
The last bolt on the gate has fallen out and the rate cutting horse is about to leave the barn,” Chris Zaccarelli, chief investment officer for Northlight Asset Management, said. “It’s surprising to see how quickly the narrative has shifted from before last week’s jobs report from whether or not there will be a cut in September, to how many cuts we will see after there is definitely a cut in September.”
Beef prices Rise 2.7% in August
The price of food at home rose 0.6% in August, up from -0.1% in July. The 0.6% jump is the highest monthly increase since August 2022. The overall food index rose 0.5% in August, the highest since January.
Specifically, all six major grocery store food group indexes increased in August. The index for fruits and vegetables rose 1.6% for the month with tomato prices rising 4.5% and apple prices surging 3.5%. Also, the meats, poultry, fish and eggs index increased 1.0% while the beef index rose 2.7%. Here are some other notable increases:
- Apparel costs up 0.5% in August, highest since February
- Shelter costs up 0.4%, the highest since January.
- Used cars and trucks up 1.0%, the most since January.
- Energy up 0.7%, the highest since June.
- Gas prices up 1.9%, the most since last December.
“In today’s numbers, we are seeing some impact from tariffs, especially with higher prices on cars and clothes,” Jeffrey Roach, chief economist for LPL Financial, said. “A sticky category not as connected to trade is insurance which we expect to weigh on inflation for the next few months. The hot inflation print will not likely change the Fed’s plan to cut rates in September but it’s possible the Fed will hold in October if inflation expectations no longer look well-contained.”
The CME FedWatch poll of interest rate traders says 90.8% expect a 25-point rate cut in September while 9.2% expect a 50-point cut. In October, 82.5% expect a second rate cut.
“The Fed’s path is clear in the short run, but over the medium term the fact that core inflation is running quite a bit higher on a month-over-month basis is going to complicate matters and the market knows this,” Zaccarelli said.