US CPI: Inflation for August Hits 2.9%, Inline with Consensus. Here’s to Interest Rate Cuts?

Next week’s Fed meeting is now almost certainly going to give everyone what they’ve been waiting for. Especially Trump. A rate cut is 95% baked in.

💡 Inflation Lands as Expected

• It’s here! The latest inflation print showed consumer prices USCPI increased at the expected 2.9% clip in August. It’s a very acceptable rate of growth, inline with what everyone was eyeballing and now the door to a rate cut next week looks wide open.
• The CPI report, released by the Bureau of Labor Statistics, showed prices actually rose for the fourth month in a row, up from the previous month’s 2.7%.
• Analysts say the consistent price growth might be a result of Trump’s tariffs trickling into prices for consumer goods. If that’s the case, and if those guys at the Fed believe so too, then next week’s interest rate decision could be a curveball.

📌 Digging into the Details

• Core CPI, which excludes the more volatile energy and food prices and is perceived as a more precise measure of inflation, stayed unchanged at 3.1% in August. The figure wasn’t a surprise as it was already expected by Wall Street.
• Month over month, the growth rate hit 0.4% from 0.2% in July. Core monthly prices also marked an increase of 0.3% but stayed flat from the prior month’s pace.
• So where is the data leading? The Fed meets up next week for a two-day rate-setting discussion and markets are now pricing in a 95% chance of a cut, according to the CME’s FedWatch tool.

🎤 Reactions Across the Board

• Markets reactions: the US dollar slipped in the first moments after the data release. The EURUSD climbed above $1.17, reversing prior losses right after the European Central Bank decided to keep its interest rate flat.
• Stock futures gained with those tied to the Nasdaq pumping the most, up 0.3% ahead of Thursday’s opening bell. S&P 500 futures were up 0.25% and Dow Jones futures advanced 0.2%.
• By the looks of it, traders and investors are happy with the number and the animal spirits will try to extend the S&P 500’s record-setting run to three days in a row. Both the broad-based benchmark and its tech-dense peer closed at records on Wednesday.