U.S. inflation data in August came in broadly in line with estimates, but the core rate rose faster than expected, putting a Fed rate hike next week firmly on the table.
The Consumer Price Index rose 0.4% in August, in line with economist forecasts of 0.4% and July’s 0.1% increase.
On a year-over-year basis, headline CPI rose 3.4%, versus expectations of 3.4% and July’s 3.4% reading.
Core CPI, which excludes volatile food and energy prices, increased 0.3% month over month, faster than forecasts of 0.2% and July’s 0.2% rise.
On an annual basis, core inflation came in at 2.4%, in line with expectations of 2.4% and July’s 2.5%.
The price of bitcoin BTC$77,530.93 dipped back to $76,700 in the minutes following the news.
The two-year Treasury yield jumped six basis points to 4.61% as traders began to assign nearly a 100% chance the Fed will hike rates at its policy meeting next week. The 10-year yield — less closely tied to Fed policy — was flat at 4.95%.
Nasdaq 100 futures rose to a session high, up 0.8%.
Always a closely-watched report, the August CPI took on supreme importance in the past two weeks after Fed Chairman Kevin Warsh hinted at his Jackson Hole speech that the Fed might have to act if inflation didn’t soon show signs of slowing down.
Bond markets have been in a fever pitch ever since, with traders flipping from assuming no rate hikes — perhaps for the rest of 2026 — to hedging against as much as 75 basis points in tightening this year.
That sent the 10-year U.S. Treasury yield from the 4.60% area to just shy of 5.00% ahead of this morning’s data. The 2-year yield — which more closely correlates with Fed policy — rose from 4.20% to 4.56% ahead of the numbers.
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