U.S. CPI Data for August: What are the expectations of stock market investors?

Global stock market investors are awaiting inflation data to predict the direction of a recent shaky equity rally. The August CPI report is scheduled for release by the U.S. Bureau of Labor Statistics on Wednesday, September 13 at 8:30 A.M. Eastern Time or 6 P.M. IST. The consumer price index data for August is expected to determine the Fed’s policy decisions for the remainder of the year.

However, investors need to be cautious and not get carried away by the August inflation numbers in isolation. The US Fed is expected to consider both August and September inflation numbers before taking a rate hike decision in its November FOMC meeting.

Therefore, the Fed is expected to maintain the status quo in the next FOMC meeting scheduled on September 19-20, when a Summary of Economic Projections also gets published. At its meeting on September 20, the U.S. central bank is anticipated to keep benchmark rates unchanged.

Federal Reserve officials have also recently substantially minimized the likelihood of an interest rate increase on September 20.

At the FOMC meeting on November 1, the Fed will decide whether to make what may be the final hike in federal funds rates based on the combined CPI data for August and September.

Markets now predict a nearly 44% chance of a rate increase at the Fed’s meeting in November, up from 28% a month earlier.

A positive inflation report, especially on the core side, should be sufficient to keep the Fed on hold and prevent future interest rate increases. However, a sticky inflation or even a slight uptick in CPI data could make the Fed wait for September data before raising rates in its November FOMC meeting.

A substantial increase in month-over-month inflation is anticipated in August, reaching approximately 0.8%. However, excluding food and energy, core CPI is predicted to increase by 0.4% month over month.

The S&P 500’s (SPX) 16% year-to-date increase has been fueled in part by indications the U.S. economy is headed for a so-called “soft landing,” in which the Federal Reserve is able to reduce inflation without significantly harming growth.

The job market has remained solid, but not strong enough to raise concerns that the Fed will need to raise interest rates further to combat inflation, actions that shook markets last year, according to last week’s employment report.