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The Bureau of Labor Statistics reported that the consumer price index rose 0.4% in August, increasing the likelihood of a Federal Reserve interest rate hike.

The Bureau of Labor Statistics reported that the consumer price index rose a seasonally adjusted 0.4% for the month of August, bringing the 12-month increase to 3.4%. This report serves as the final major inflation indicator before the Federal Reserve holds its policy meeting next week.

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Core CPI, which excludes volatile food and energy prices, rose 0.3% monthly, reaching an annual rate of 2.4%. Energy prices were a primary driver of the headline number, with gasoline prices jumping 3.9% and the energy index rising 2.1% for the month. Shelter costs also saw a 0.3% climb, while transportation services increased by 0.5%. Market analysts and traders are now placing higher bets on a Federal Reserve interest rate hike. Odds for a quarter-percentage point increase jumped to nearly 90% following the data. Chairman Kevin Warsh stated that the central bank has work to do to reach the 2% inflation target. While some officials have suggested a patient approach, the current data suggests that interest rates may remain high as disinflation continues to show signs of slowing.

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