US CPI Data Today: Will it be a second consecutive month of rising annual inflation?

The U.S. Bureau of Labor Statistics will release the latest set of U.S. inflation data today. The August CPI data is scheduled to be released today September 13 at 8:30 A.M. Eastern Time. The producer price index (PPI) reading is scheduled for Thursday which taken together with CPI will set the outlook for U.S. interest rates ahead of the Fed’s meeting on September 20.

Inflationary pressure in the US seems to be gathering steam. US inflation was recorded at 3% in June which rose to 3.2% in July 2023. The market consensus is that the annual inflation in August will be 3.6%, registering a second consecutive month of rising annual inflation. The year-on-year consumer prices have fallen from a high of 9.1% in June 2022 but are still far away from the Fed’s inflation target of 2%.

The core CPI is expected to have risen by 4.3% in the year to August. This would be the weakest year-on-year increase since September 2021, following a 4.7% increase in July.

Positive inflation data, particularly on the core side, could be enough to keep the Fed to hold and avoid raising interest rates in the future. However, the Fed might decide to wait until September data before lifting rates at its November FOMC meeting if inflation remains sticky or even if CPI statistics show a minor increase.

Stubborn inflation remains the biggest threat to the US Fed’s plans and to the economy as a whole.

According to many market experts, inflation over the previous month is predicted to rise significantly in August, hitting roughly 0.8%. Core CPI, on the other hand, is expected to rise by 0.4% month over month when food and energy are excluded.

Chintan Mehta, CEO, Abans Holdings says, “US CPI ( monthly ) for the month of August is expected around 0.6 % against 0.2 for the month of July. As it’s expected on higher side probability it might take little long before interest cycle picks out and Fed may think of raising interest rate more in next meeting.”

“It’s important to observe CPI yearly and core CPI as it will eliminate short-term spikes in CPI due to surges in crude price. Any lower reading from the expectation of 0.6% can give the market a positive sign and participate in risk-on mode,” adds Mehta.

Going forward, all eyes will be on US Fed’s FOMC meeting next week scheduled on September 19-20 when a Summary of Economic Projections also gets published. Interest rate traders predict a 93% possibility of rates remaining unchanged in September, but only a 56% chance of a halt at the November meeting. Based on the combined CPI figures for August and September, the Fed will determine whether to make what could be the final raise in federal funds rates at its November 1 meeting.